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How is withdrawable balance calculated after Pledging?

You can pledge the securities in your Demat account to trade futures and options. When you do so, the fund that you can withdraw from your account will be calculated after making the adjustments across the cash in your account and the collateral margin that is blocked for your overnight derivative positions held.

Please note that at least 50% of the margins blocked for overnight derivative positions have to come in the form of cash or cash equivalent collateral. The other 50% of the margin requirement can come in the form of other non-cash equivalent collateral margins (margins received by pledging liquid funds are considered to be cash equivalent).

Here's an example to help you understand this better.

Assume you initiate an overnight F&O position that requires a margin of Rs.1,00,000/-. Before initiating the F&O position, you have -

  1. Cash - Rs.70,000/-
  2. Collateral Margin - Rs.80,000/- from securities pledged and after applying the required haircut
  3. Cash Equivalent - Rs.20,000 from pledged liquidbees.

Here is how Rs.1,00,000/- for the F&O margin will be accounted for -

Component Available for use (INR) Utilized (INR) Balance (INR)
Collateral Margin 80,000 50,000 30,000
Cash Equivalent 20,000 20,000 0.00
Cash 70,000 30,000 40,000
Total Margin collected 1,00,000/-

This leaves you with a withdrawable balance of Rs. 40,000.

The formula used to calculate the withdrawable balance is -

Withdrawable balance = (Available cash balance - Proceeds from stocks sold yesterday & today - - F&O profits today - Funds added today)

Withdrawable balance = Closing balance as per the Funds Statement - Unsettled credits - Funds added today + Collateral utilised

Unsettled credits = Today’s and yesterday’s credits in the equity segment + Today’s credits in the derivative segment

Collateral utilised = Total collateral used towards margin requirement from the cash and non-cash equivalents

Please note, if you do not have enough collateral margins to cover 50% of the margin blocked, the difference is also charged from the available cash balance, which in turn will reduce your withdrawable balance further.

Important Points:

  1. Collateral margin received from pledging stocks or liquid mutual funds to trade F&O will not be considered part of the withdrawable balance.
  2. Funds added during the day are available for trading immediately. However, since we need to perform a balance reconciliation at the end of the day, you can withdraw these funds only after one day.
  3. Securities forming part of the Cash and non-cash components can be tracked here .