Hello!
I’d appreciate some clarity on the following query regarding MTF and interest calculations when using cash-equivalent margin pledges.
Suppose I buy AngelOne 1D Nifty Liquid ETF — a cash-equivalent instrument for pledging — and simultaneously take a MTF position.
Let’s say I use MTF to buy ₹1,000 worth of a 2x eligible scrip, XYZ.
Now, in the usual scenario where margin is non-cash, interest is charged on the entire ₹1,000 since the full amount is funded by Dhan.
But if the margin comes from pledging a cash-equivalent ETF like Nifty Liquid, how is interest charged?
Will interest still apply on the full ₹1,000, or only on the funded portion (₹500), assuming the other ₹500 is covered via my cash-equivalent pledged margin?
Thanks!
Hi @thisisbanerjee, thanks for reaching out!
When using cash equivalents as pledged margin for MTF, here’s how interest and charges are handled:
MTF Interest:
Even if you use cash equivalent collateral, the position is fully funded by the broker. Hence, MTF interest is charged on the entire funded amount, not just the portion beyond your pledge.
50:50 Margin Rule (SEBI):
This rule applies only on the trade day (T-day) for equity delivery and MTF positions. If 50% of the margin isn’t in cash or cash-equivalent on that day, margin interest is charged for that day only.
DPC (Delay Payment Charges):
If your ledger turns negative, DPC interest applies daily on the negative balance until cleared.
Ageing Debit (T+5 Auto Square-Off):
If the negative ledger balance is not cleared within T+4 working days, the system will auto square off positions on T+5, to the extent of the debit. Read more about it in our risk policy here.
Let us know if you need help reviewing your margin or MTF interest charges.
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Hey @Sameet That helped. Thank you.
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hello @Sameet
As we know that Interest on borrowed amount for MTF is calculated on daily basis and posted to the ledger on weekly basis.
I have a query - Is there any provision by which the payment of interest part is deferred to the time of closing the MTF position in case when I don’t want to pay interest part weekly ?
One possible solution can be - the negative ledger balance is added to the borrowed amount on weekly basis. Is it possible ?
Thanks,
Saurabh