MTF in one line
Margin Trading Facility is SEBI-regulated funding that lets you buy delivery shares by paying only a fraction upfront - your broker finances the rest, charging interest until you repay or sell.
How a typical MTF trade works
- You want ₹1,00,000 of an approved stock but deploy only ₹30,000.
- The broker funds the remaining ₹70,000 under MTF.
- The purchased shares are pledged to the broker as collateral (through the CDSL/NSDL margin-pledge system - they stay in your Demat).
- Interest accrues daily on the funded ₹70,000 until you square off or convert to full delivery.
- Sell whenever you like: proceeds first repay the funding + interest; the rest is yours.
The rules that protect (and constrain) you
- Eligible stocks only - exchanges publish an approved (Group-1) list; speculative small-caps don't qualify.
- Minimum margins - SEBI mandates margin based on the stock's VaR + ELM; brokers may ask more.
- Margin calls - if the stock falls, your collateral value drops; you must add funds/collateral or the broker can square off the position.
- Explicit consent - MTF requires a one-time authorisation; positions are disclosed to exchanges daily.
What MTF costs
Two components: interest on the funded amount (varies by broker and relationship) and normal brokerage/statutory charges. Because interest accrues daily, MTF suits positions with a clear thesis and time frame - not indefinite leverage.
MTF vs F&O leverage
| MTF | Futures | |
|---|---|---|
| What you hold | Actual shares (dividends, voting) | A contract |
| Time limit | Open-ended (interest ticking) | Expiry-bound |
| Stock universe | Approved delivery list | F&O list only |
| Risk profile | Margin calls on falls | Mark-to-market daily |
MTF fits investors who want more of a stock they already believe in; F&O fits shorter, defined bets.
When MTF makes sense - and when it doesn't
Sensible: high-conviction large-cap positions where you expect the move to outpace interest costs. Not sensible: averaging losers, chasing momentum in weak stocks, or funding money you may need on short notice.
At Parasram India, MTF exposure is set per client - for HNI clients and other investors alike, based on your risk profile and requirements, with no fixed cap. Talk to the branch to set up MTF that fits how you invest.
