How is interest calculated on my Pay Later (MTF) position if I have cash and/or pledged shares as margin
To ensure your cash remains available for other trades, the system first utilizes the margin value from your pledged shares and then considers your cash balance. However, interest in MTF is charged on the entire portion of the trade that is not funded by your own cash. This means that the amount supported by pledged shares (collateral) is also treated as funded under MTF, and interest is charged on it.
Below are examples to help understand this.
Scenario 1: You have only cash margin available
You buy shares worth ₹1,00,000 using MTF.
Assume the margin requirement is 50%.
Cash margin | ₹50,000 |
MTF funded amount | ₹50,000 |
Interest is charged on: | ₹50,000 |
Scenario 2: You have has both cash and pledged shares available
You buy shares worth ₹1,00,000 using MTF.
Available margin:
• Cash balance: ₹20,000
• Collateral margin from pledged shares: ₹30,000
Margin requirement =₹50,000
Cash margin | ₹20,000 |
Collateral margin | ₹30,000 |
Funding structure of the trade:
Trade value | ₹1,00,000 |
Cash contributed by you | ₹20,000 |
Amount supported by pledged shares | ₹30,000 |
Remaining amount funded through MTF | ₹50,000 |
Since only ₹20,000 is your own cash, the remaining ₹80,000 of the trade value is considered as MTF exposure (₹30,000 supported by pledged shares + ₹50,000 funded by MTF).
Interest is charged on: ₹80,000.
Scenario 3: You have only pledged shares available
You buy shares worth ₹1,00,000 using MTF and have ₹50,000 collateral margin from pledged shares.
Collateral margin | ₹30,000 |
Funding structure of the trade:
Trade value | ₹1,00,000 |
Cash contributed by you | ₹0 |
Amount supported by pledged shares | ₹50,000 |
Remaining amount funded through MTF | ₹50,000 |
Since no cash is used, the entire ₹1,00,000 position is considered MTF exposure.
Interest is charged on: ₹1,00,000.
In summary:
Interest in Pay Later (MTF) is charged on the portion of the trade value not funded by your own cash balance. To ensure your cash remains available for other trades, the system first utilizes the margin value from your pledged shares and then considers your cash balance.
The margin value from pledged shares is treated as funding support for the MTF position, and interest is applicable on that portion as well.
If you want to reduce your MTF exposure, you can use the conversion feature to add cash against your open MTF trades and convert them to delivery (CNC). This reduces your overall MTF debit, and accordingly the amount on which interest is charged.