Margin Trading Facility (MTF) FAQs

What is MTF?

Margin Trading Facility (MTF) is a service that enables you to purchase shares by paying only a portion of the total cost. The remaining amount is funded by Zerodha, and interest is charged on this amount.

Example scenario

Let’s assume you have ₹1000 in your trading account, and you want to buy a stock priced at ₹1000 per share. If the stock qualifies for 3 times margin in MTF, you can buy up to 3 shares with your ₹1000.

Here’s how:

• Total value of 3 shares: ₹1000 × 3 = ₹3000
• Your contribution (the margin you pay): ₹1000
• Amount funded by Zerodha: ₹3000 (total) - ₹1000 (your contribution) = ₹2000

Zerodha will fund ₹2000, and you’ll be charged 0.04% interest per day on this funded amount.

Interest calculation:

If you sell the stock after holding the position for 10 days, the interest calculation for the funded amount (₹2000) would be as follows:

• Daily interest: ₹2000 × 0.04% = ₹0.80 per day
• Total interest for 10 days: ₹0.80 × 10 = ₹8

After 10 days, you would pay ₹8 in interest for holding these 3 shares using MTF.

What are the charges for using MTF?

The charges associated with MTF are as follows:

• Interest: 0.04% per day(₹40 per lakh) on the funded amount. The interest is applied from T+1 day until the stocks are sold.
• Brokerage: 0.03% or ₹20, whichever is lower.
• Pledge charges: ₹30+ GST per ISIN per pledge, and no charges for unpledging.
• Square-off charges: ₹50 + GST per order squared off by Zerodha.

Which stocks are eligible for MTF?

The eligible stocks for MTF can be found in the approved list of securities for MTF.

How to buy stocks using MTF?

DDPI must be activated to buy stocks using MTF. You can place a buy order from the MTF section on the order window. After placing the order, you will receive a pledge request by 5:30 PM on the same day. For the MTF order to be successful, you must accept the pledge request before 7 PM.

What is the cut-off time for pledging MTF stocks?

The stocks must be pledged before 7 PM on T day.

What happens if shares aren't pledged by the cut-off time?

If you don’t pledge your shares before the 7 PM cut-off:

• The trade will automatically convert to a delivery trade (CNC).
• If you don’t have enough funds to cover the full margin for a delivery trade, your Zerodha account will show a negative balance.
• If the negative balance is not cleared, Zerodha will sell the shares purchased using MTF to recover the outstanding amount.

How to unpledge stocks for MTF?

There is no need to unpledge MTF stocks. You can directly sell MTF holdings from Kite without placing an unpledge request. However, sale proceeds from selling stock will only be available on the next day for further trades.

How to identify MTF holdings and exit on Kite?

Your MTF holdings will be labelled with an M tag on the Kite holdings page. To exit your MTF position:

1. Hover over the stock and select Options.
2. Click on Exit to sell the MTF quantity.

Alternatively, you can add the stock to Marketwatch and exit using the MTF order type.

How much margin will I receive?

The margin you receive depends on the Value at Risk (VAR) and the Exposure Limit Margin (ELM) for each stock.

For stocks having F&O contracts:

• Margin is calculated as VAR + 3x ELM.

For non-F&O stocks:

• Margin is calculated as VAR + 5x ELM.

Example scenario

Let’s say a stock is priced at ₹100 and its margin requirement is calculated as VAR + 5x ELM (for non-F&O stocks).

• VAR: 5%
• ELM: 4%

The margin requirement would be: VAR + 5 × ELM = 5% + 5 × 4% = 5% + 20% = 25%

Thus, for a stock priced at ₹100, the margin required is ₹25. This means with ₹100 in your account, you can buy: ₹100 / ₹25 = 4 shares.

How to check MTF funds statement?

As per regulations, the MTF funds statement is maintained separately and is displayed on Console. Users can click on the MTF category to view the MTF funds statement.

How is the funded amount calculated?

The funded amount is calculated as the difference between the total purchase value and the initial margin required.

Example scenario

• Stock price: ₹1000
• Initial margin required: ₹200
  

The funded amount would be: ₹1000 - ₹200 = ₹800

How to check the interest charged on the funded amount by Zerodha?

The daily opening balance of the MTF ledger is considered the funded amount, which is used to calculate the interest rate of 0.04% per day.

What happens if the value of the pledged stock decreases?

Zerodha collects mark-to-market (MTM) margins daily based on the buy price of your positions. These MTM margins are reset each day, and new MTM margins are blocked. MTM is collected only on losing positions and not on profitable ones.

If you buy the same stock on different days, the MTM calculations are done separately for each day’s average price, even though your overall position is shown as a combined total.

How long can I hold shares purchased using MTF?

You can hold shares purchased using MTF as long as you want. An interest charge of 0.04% per day(₹40 per lakh) will be applicable on the funded amount The charges will apply from T+1 day until the stocks are sold.

What is the maximum funding allowed under MTF?

The maximum MTF funding is ₹50 lakh per account, with a limit of ₹10 lakh per stock.

Can I do BTST using MTF?

Yes, but interest will be charged on the opening balance on T+1 day.

Can I do MTF trades in both NSE and BSE?

Currently, Zerodha offers MTF only on NSE, not on BSE.

Can I convert MTF positions to CNC or vice versa?

You cannot convert MTF to CNC/MIS or vice versa.

What happens to stocks bought using MTF during corporate actions?

For any corporate action, except for bonus and stock splits, MTF positions will be closed one day before the ex-date.

Can I buy stocks using MTF on a settlement holiday?

Yes, stocks can be bought or sold using MTF on a settlement holiday. However, T1 holdings (i.e., BTST holdings) cannot be sold on a settlement holiday. For example, if Friday is a settlement holiday and you bought stocks on Thursday using MTF, you won't be able to sell them on Friday.

Can I place an AMO or GTT order on MTF?

Currently, AMO and GTT orders cannot be placed using MTF, but they will be allowed soon.

Who cannot invest using MTF?

Currently, NRIs, minors, and custodial participants are not eligible for MTF with Zerodha.

Why do I need DDPI/POA to trade in MTF?

MTF is only available for users with POA/DDPI enabled due to operational complexities.

How are taxation and P&L reports updated in Console?

As per the regulations, taxation for MTF trades is done on a First-in First-out (FIFO)  basis at the demat level. Your MTF trades are treated like any other delivery trade (CNC), and a combined P&L and capital gains statement is prepared accordingly.