How is interest calculated on my outstanding MTF amount?
Interest rates applicable for MTF trades are as follows:
| Day | Interest (%) |
|---|---|
| T to T+1 day | NIL |
| From T+2 for 4 calendar days | 0.0274% per day |
| 6th calendar day from the trade day onwards | 0.05% per day |
The MTF facility provides investors with a flexible interest payment structure. Since interest is charged on a daily basis, cash balances available in your trading account are also taken into consideration to arrive at the outstanding amount on which interest is calculated. So if you have funds in excess of the minimum margin requirement in your trading account, it will be taken into account to determine interest dues for the day. This will reduce the charges applicable to your MTF position. These funds will not be blocked and can be used for regular trades (only the minimum requirement will be blocked).
For example, Mr Ram wants to purchase 100 shares of HDFC Bank at Rs.1,000 per share (Rs. 1 lakh). Since he doesn't have sufficient funds for the trade, he avails of the MTF facility. After 30 days, he sells these shares at Rs. 1,100 per share.
Scenario 1: Mr Ram does not have the required capital to place the order but has pledged his holdings, giving him a buying power of Rs. 50,000
| Particulars | Amount |
|---|---|
| Cash Margin | NIL |
| Pledge Margin | Rs. 50,000 |
| Total Margin Available | Rs. 50,000 |
| Purchase Value | Rs. 1,00,000 |
| Margin Requirement | 25% (Rs. 25,000) |
| Cash Margin Utilised | NIL |
| Pledge Margin Utilised | Rs. 25,000 |
| Funded by Geojit | Rs. 1,00,000 (100% funding) |
| Sale Value | Rs. 1,10,000 |
| Profit | Rs. 10,000 |
| Amount on which interest is charged | Rs. 1,00,000 |
| Interest on MTF @ 18% for 30 days | Rs. 1,479 |
| Net Profit | Rs. 8,521 |
Here, the unutilised pledge margin of Rs. 25,000 can be used to take additional positions.
Scenario 2: Mr Ram has Rs. 25,000 as cash margins.
| Particulars | Amount |
|---|---|
| Cash Margin | Rs. 25,000 |
| Pledge Margin | NIL |
| Total Margin Available | Rs. 25,000 |
| Purchase Value | Rs. 1,00,000 |
| Margin Requirement | 25% (Rs. 25,000) |
| Cash Margin Utilised | Rs. 25,000 |
| Pledge Margin Utilised | NIL |
| Funded by Geojit | Rs. 75,000 (Rs. 1,00,000 - Rs. 25,000) |
| Sale Value | Rs. 1,10,000 |
| Profit | Rs. 10,000 |
| Amount on which interest is charged | Rs. 75,000 |
| Interest on MTF @ 18% for 30 days | Rs. 1,110 |
| Net Profit | Rs. 8,890 |
Scenario 3: Mr Ram has Rs. 10,000 as cash margins. He also pledged his holdings, giving him an additional buying power of Rs. 50,000.
| Particulars | Amount |
|---|---|
| Cash Margin | Rs. 10,000 |
| Pledge Margin | Rs. 50,000 |
| Total Margin Available | Rs. 60,000 |
| Purchase Value | Rs. 1,00,000 |
| Margin Requirement | 25% (Rs. 25,000) |
| Cash Margin Utilised | NIL |
| Pledge Margin Utilised | Rs. 25,000 |
| Funded by Geojit | Rs. 1,00,000 |
| Sale Value | Rs. 1,10,000 |
| Profit | Rs. 10,000 |
| Amount on which interest is charged | Rs 90,000 (Rs 1,00,000 - Rs 10,000) |
| Interest on MTF @ 18% for 30 days | Rs. 1,332 |
| Net Profit | Rs. 8,668 |
Here, the unutilised pledge margin of Rs. 25,000 and cash margin of Rs. 10,000 can be used to take additional positions. Further, MTF interest charges are calculated after taking into account the additional cash balance available in Mr. Ram's trading account.
Scenario 4: Mr Ram has Rs. 75,000 as cash margins.
| Particulars | Amount |
|---|---|
| Cash Margin | Rs. 75,000 |
| Pledge Margin | NIL |
| Total Margin Available | Rs. 75,000 |
| Purchase Value | Rs. 1,00,000 |
| Margin Requirement | 25% (Rs. 25,000) |
| Cash Margin Utilised | Rs. 25,000 |
| Pledge Margin Utilised | NIL |
| Funded by Geojit | Rs. 75,000 (Rs. 1,00,000 - Rs. 25,000) |
| Sale Value | Rs. 1,10,000 |
| Profit | Rs. 10,000 |
| Amount on which interest is charged | Rs. 25,000 (Rs. 1,00,000 - Rs. 75,000) |
| Interest on MTF @ 18% for 30 days | Rs. 370 |
| Net Profit | Rs. 9,630 |
Here, the unutilised cash margin of Rs. 50,000 can be used to take additional positions. Further, MTF interest charges are calculated after taking into account the additional cash balance available in Mr Ram's trading account.
Margin requirements vary scripwise and are subject to periodic changes. Check the current list of MTF eligible shares and their margin requirements.
Geojit will be debit MTF booked loss for the month to your normal ledger on the last day of the month, if there is no credit balance available in the MTF cash ledger. This is to prevent interest accumulation in the MTF book and to collect the booked loss on a regular basis.
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