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MTF allows investors to buy stocks for delivery using leverage, enabling purchases even without full upfront funds. Depending on the stock, users can borrow up to 80% of the trade value.
The borrowed funds attract an interest rate of 0.04% per day, translating to ₹40 per ₹1 lakh daily.
How it works
To use MTF, users must enable the feature in their Zerodha account.
If the account has PoA (Power of Attorney) or DDPI (Demat Debit and Pledge Instruction) enabled, activation is immediate. Otherwise, the process may take up to a day.
Placing an MTF order on Kite is straightforward. Users select the MTF option in the order window. Once executed, holdings acquired through MTF are marked with an “M” in the portfolio. Daily interest charges and margin requirements can be tracked via the Console MTF statement.
Costs and charges
- Interest Rate: 0.04% per day on borrowed funds.
- Brokerage: 0.03% or ₹20, whichever is lower, per executed order.
- Pledge charges: ₹30 + GST per ISIN for pledging; no charges for unpledging.
- Square-off charges: ₹50 + GST per squared-off order.
Risks highlighted
Zerodha cautioned users about the risks of leveraged trading. While equity delivery trades allow investors to hold stocks over time, leveraged positions incur daily costs, which can erode profits.
If stock prices decline, users must add margin funds or close positions.
Why now?
Kamath acknowledged that Zerodha had been hesitant to introduce MTF but noted the growing adoption of such facilities in the industry and the increasing contract values in derivatives.
I don’t know if it is a good time with the fall in the markets ????, but we are finally launching MTF (margin trading facility) which allows you to buy stocks for delivery by borrowing money from us.
I haven’t been sure about this product for a long time because of obvious… pic.twitter.com/q9ySO7Roys
— Nithin Kamath (@Nithin0dha) December 19, 2024
He added that offering MTF was essential to stay competitive, as Zerodha was the only major broker not providing this feature until now.
Comparison with LAS
Zerodha clarified that MTF carries a higher interest rate than its Loan Against Securities (LAS) product offered through its NBFC, Zerodha Capital.
While LAS is priced at 11.5%, MTF is costlier due to its higher risk profile, as it provides up to 80% margin compared to LAS’s 50%.
