What is the interest rate for using MTF and how is it calculated?

Margin Trading Facility (MTF) allows users to buy shares by paying a part of the price initially, while Zerodha funds the remaining amount. A daily interest rate is charged on the funded amount.

Interest rate calculation

If a stock qualifies for a 3x margin in MTF, is bought and then sold after 10 days, the calculation works as follows:

• Funded amount:
  • Total value of 3 shares at ₹1000 each = ₹3000
  • Investor's payment: ₹1000
  • Funded amount by zerodha: ₹3000 - ₹1000 = ₹2000
• Daily interest:
  Daily interest: ₹2000 × 0.04% = ₹0.80
• Interest for 10 days:
  ₹0.80 × 10 = ₹8

The total interest payable for holding the shares for 10 days would be ₹8.

Additional costs for using MTF

Along with the daily interest rate, other costs apply when using the MTF facility:

1. Brokerage:
   A fee of 0.03% or ₹20, whichever is lower, is charged per trade executed through MTF.
   
2. Pledge charges:
   Stocks bought through MTF must be pledged as collateral. Zerodha charges ₹30 + GST per ISIN for pledging, while unpledging is free.
   
3. Square-off charges:
   If an MTF position is squared off by Zerodha (e.g., due to insufficient margin), a charge of ₹50 + GST is applied for each squared-off order.