Why is the balance in the funds statement displayed as negative?

The Zerodha account balance is displayed as negative for the following reasons:

• Daily marked-to-market (M2M) losses: When holding futures positions, the losses for such positions are settled on a daily basis. The settlement amount is deducted from the available free cash balance, not from SPAN or Exposure margins which may lead to a negative balance in the account if sufficient funds are not maintained.
• Charges: The account balance will be negative if there aren't sufficient funds in the account and Annual Maintenance charges, DP charges and other charges are deducted from the account.
• Utilisation of collateral margin: The collateral margin obtained by pledging securities is not included in the funds statement. Therefore, if collateral margin is utilised to take positions, the funds statement may display a negative balance.

Example Scenario

1. A client has an opening balance of ₹1000 and a collateral margin of ₹1000 from stocks.
2. A position is taken that requires ₹2000, and collateral margin is utilised for this position.
3. ₹2000 will be blocked from the funds statement at the end of the day, and the balance in the Zerodha account will become -₹1000.
4. The shortfall of ₹1000 is funded through collateral and will not result in any penalty.
   

The withdrawable balance on Console will also be negative. A brokerage of ₹40 per executed order will be charged instead of ₹20 while placing an F&O order if the Zerodha account has a negative balance. Delayed payment charges of 0.05% per day (18% per annum) will be levied on the debit balance. To learn more, see What does "Delayed payment charges" entry on the funds statement mean?