5.14What is Margin Trading Facility (MTF)?
1What is it?
MTF lets you buy shares for delivery by paying only part of the value; the broker funds the rest as a loan and charges interest daily.
2Why does it exist?
It lets investors hold larger delivery positions. The bought shares are kept as collateral (pledged).
3Stock market example
Only approved stocks are eligible, and SEBI sets minimum margins by risk group. For example, you buy ₹1,00,000 of a stock paying ₹25,000; the broker lends ₹75,000 at, say, 15% a year.
4Quick revision
- MTF = leveraged delivery.
- Broker loan with daily interest.
- Shares pledged as collateral.
5Knowledge check
Q1. What makes MTF different from intraday?Show answer
You can hold overnight, for delivery, by borrowing.
Q2. Who keeps the shares as collateral?Show answer
They are pledged to the broker.
Q3. Is interest charged on MTF?Show answer
Yes, daily.