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 terms and margins are structured per client - based on your portfolio, segments and risk profile rather than a one-size sheet. Talk to the branch to set up a margin relationship that fits how you invest.
