What is MTF?
Margin Trading Facility (MTF) is a SEBI-regulated product that lets you buy shares for delivery by paying only part of their value upfront. Your broker funds the rest, and you pay interest on the borrowed amount for as long as you hold the position. The shares you buy are held as collateral (pledged to the broker) until you repay.
It is sometimes called "pay-later" or "buy-now-pay-later for stocks", because you take delivery of the shares today and settle the funded portion later. Unlike intraday trading, MTF positions can be carried overnight and held for days, weeks, or months — as long as you keep the required margin and pay the interest.
How MTF works
The mechanics are straightforward once you see the four moving parts: your margin, the broker's funding, the pledge, and the daily interest.
- You deposit the initial margin — a percentage of the trade value, in cash or as approved pledged securities.
- The broker funds the balance — up to the regulatory limit for that stock.
- Shares are pledged — the funded shares are held in a designated "Client Securities under Margin Funding Account" by way of pledge. You remain the owner and receive dividends and corporate-action benefits.
- Interest accrues daily — charged only on the funded amount, only for the days you hold, typically from T+1 until you sell or repay.
Worked example
Say you want ₹1,00,000 of an eligible stock and the required margin is 25%:
| Total purchase value | ₹1,00,000 |
| Your margin (25%) | ₹25,000 |
| Funded by broker (75%) | ₹75,000 |
| Interest @ ~14% p.a. for 30 days | ≈ ₹863 |
If the stock rises 10%, your gain is ₹10,000 on just ₹25,000 of your own money (minus interest) — a far higher return on capital than buying outright. If it falls 10%, you lose ₹10,000 and still owe the interest. The leverage cuts both ways.
SEBI rules & regulations
MTF is tightly regulated. The key rules brokers and investors must follow:
- Only registered brokers with adequate net worth and risk-management systems may offer MTF.
- Margin must be collected upfront. The exact percentage is set per stock based on its risk (VaR + ELM margins as in the cash segment), so a more volatile stock requires a higher margin and offers less leverage. There is no single flat leverage number across all stocks.
- Initial margin may be in cash, cash-equivalents, or approved Group I securities/ETFs, after an appropriate haircut.
- Funded shares are held only by pledge in a separate, tagged demat account — brokers cannot use one client's securities to fund another's trades.
- Broker exposure limits: a broker's total MTF indebtedness cannot exceed 5× its net worth, and exposure is capped relative to borrowed funds plus net worth.
- Separate client-wise records for funds and securities must be maintained.
Which stocks are eligible
Not every stock can be bought on MTF. SEBI permits MTF only on Group I securities — the most liquid, stable stocks and certain ETFs — selected on liquidity and volatility criteria. The exchange publishes and updates this list.
- Your broker may apply a further, narrower list than the full exchange-approved universe.
- If a stock is removed from the approved list, brokers can square off the funded position.
- The number of eligible scrips varies by broker — the lists we track run from about 700 to 1,700 stocks.
Across the whole market far more securities carry an MTF book on any given day than any one broker lists, because each broker funds a different set. The daily dashboard shows the current count for both exchanges.
Costs & interest
The headline cost is interest on the funded amount, but it isn't the only one. Budget for all of these:
Want the numbers for your own trade? Our free MTF calculator works out the interest, total charges, break-even price and the exact price at which your first margin call would trigger.
- MTF interest — published headline rates run from 9.65% to 24% a year (about 0.026%–0.066% a day), with the middle half of brokers between 12% and 15%. It is charged daily on the funded portion only, for every calendar day you hold.
- Brokerage — ₹0–₹20 per order at most discount brokers; a percentage of trade value, roughly 0.05%–0.55%, at full-service brokers.
- Pledge / unpledge charges — roughly ₹15–₹25 plus GST per scrip.
- Statutory charges — STT, exchange transaction charges, stamp duty, GST and (on sell) DP charges, as applicable.
Risks & margin calls
MTF is a leveraged product, so the risks are real and specific:
- Amplified losses. Leverage magnifies downside exactly as it magnifies upside. A position can lose more than your initial margin.
- Margin calls. Positions are marked to market every trading day. If the stock falls and your margin drops below the maintenance level, the broker issues a margin call — you must add funds or collateral by the deadline.
- Forced liquidation. If you don't meet the margin call in time, the broker can sell your funded shares at whatever price is available — potentially crystallising a large loss.
- Interest drag. The longer you hold, the more interest compounds against your return.
- Eligibility changes. A stock dropping off the approved list can trigger square-off.
MTF vs other ways to take leverage
MTF vs intraday (MIS)
Intraday positions must be squared off the same day; MTF lets you carry delivery positions overnight and hold them. MTF charges interest for the holding period; intraday doesn't, but forces same-day exit.
MTF vs futures (F&O)
Both let you take a position larger than your cash, but they are fundamentally different instruments. With MTF you buy and own the actual shares (pledged with the broker as collateral), funded by a loan on which you pay interest. With a futures contract you own a derivative — an agreement to buy/sell at a future date — not the shares themselves. That single difference cascades into ownership, expiry, dividends, eligible universe, cost structure, and — importantly — how each is taxed.
| Dimension | MTF (Margin Trading Facility) | Futures (F&O) |
|---|---|---|
| What you hold | Actual shares in your demat, pledged as collateral | A derivative contract on the stock/index — no ownership of shares |
| Expiry | None — hold as long as margin is maintained | Fixed monthly expiry; must roll over to continue, incurring cost each time |
| Dividends & corporate actions | You receive dividends, bonus, rights (you own the shares) | No dividends; futures price adjusts for them instead |
| Eligible universe | SEBI Group I stocks & select ETFs (broad — hundreds of names) See the stocks actually funded today → | Only stocks/indices in the F&O segment (a narrower list) |
| Position sizing | Any quantity — buy 1 share or 1,000 | Fixed lot sizes only (e.g. one Nifty lot); no fractional lots |
| Leverage & margin | Broker funds part of the purchase; you post the rest as margin and pay interest on the funded amount | Exchange-set SPAN + exposure margin; no interest, but daily mark-to-market |
| Daily mark-to-market (MTM) | No daily MTM cash settlement; you hold the shares | Daily MTM — profits/losses settled in cash every day; a losing streak drains margin fast |
| Main cost | Interest on the funded amount (~12–15% p.a. at most brokers) for the holding period | No interest, but STT, exchange fees, and roll-over cost each expiry |
| Best suited for | Conviction delivery bets held days-to-months where you want ownership | Short-horizon directional/hedging views within an expiry |
Tax implications — the part most people get wrong
This is often the deciding factor, because the two are taxed under entirely different heads of income. None of the below is tax advice — rates and rules change and depend on your situation; confirm with a qualified tax professional. As a general framing of the current position:
| Tax aspect | MTF (delivery equity) | Futures (F&O) |
|---|---|---|
| Head of income | Capital gains — because you own and later sell shares | Non-speculative business income under Section 43(5)(d) — a derivative is not a capital asset |
| Rate | STCG (held ≤12 months) at 20%; LTCG (held >12 months) at 12.5% above a ₹1.25 lakh annual exemption | Taxed at your normal income-tax slab rate — no concessional 12.5%/20% flat rate |
| ITR form | ITR-2 (capital gains) | ITR-3 (business income). Filing capital-gains forms for F&O is a common, notice-triggering error |
| Expense deduction | Limited — essentially cost of acquisition; MTF interest is generally not deductible against capital gains | Brokerage, STT, exchange charges and other trading costs are deductible business expenses |
| Loss set-off & carry-forward | Capital losses set off against capital gains; STCL 8 yrs, LTCL 8 yrs (against LTCG) | Non-speculative loss offsets any income except salary; carried forward up to 8 years — but only if ITR-3 is filed on time |
| Audit | Generally not applicable to ordinary investors | Tax audit may apply above turnover thresholds; recordkeeping is heavier |
Note: STT on F&O and the governing statute have seen recent changes (the Income Tax Act 2025 and Budget 2026 STT revisions). Treat the figures above as the general shape of the rules, not a current-year quote, and verify specifics before filing.
MTF vs a loan against shares (LAS)
LAS is a separate borrowing against your existing holdings, usually at different rates and tenors. MTF is purpose-built into the trading workflow for buying eligible stocks on margin.
Advantages & disadvantages
Advantages
- Higher buying power without waiting to build capital
- Hold delivery positions overnight, unlike intraday
- No fixed expiry — hold as long as margin is maintained
- You own the shares; dividends & corporate actions accrue to you
- Interest charged only on funded amount, only for days held
- Better return on your own capital when the trade works
Disadvantages
- Losses are amplified — can exceed your initial margin
- Daily interest cost erodes returns on long holds
- Margin calls and forced square-offs in falling markets
- Limited to eligible Group I securities only
- Interest generally not deductible against capital gains
- Encourages over-trading / over-leverage if undisciplined
When MTF makes sense
MTF tends to suit a high-conviction, short-to-medium-term position in a liquid stock, where you expect a move large enough to comfortably cover the interest, and you have buffer capital to meet a margin call. It is generally not a fit for beginners, for low-conviction "punts", or for indefinite long-term holds where interest quietly eats the return.
How to start
- Have an active demat & trading account with a broker that offers MTF.
- Activate the MTF facility and accept the Rights & Obligations document — read the square-off and margin-call terms carefully.
- Keep sufficient margin (cash or pledged Group I collateral).
- Place an MTF / "Margin" order on an eligible stock — on most platforms it's as simple as choosing the MARGIN product type.
- Monitor daily — watch your margin level and the interest accruing, and have an exit plan.
Compare brokers' rates, leverage and eligible-stock counts on our Brokers page, and see the live market-wide picture on the daily dashboard.
Questions
Short answers to the questions people most often ask. Anything covered at length in the guide above is not repeated here.
MTF basics
What is the full form of MTF?
Is MTF legal in India?
How long can I hold an MTF position?
Can I lose more than I invested with MTF?
Costs & interest
What is the MTF interest rate in India?
How is MTF interest calculated?
Is MTF interest tax-deductible?
Eligibility & stocks
How many stocks can I buy on MTF?
Using this site
Why is IndiaMTF's MTF book higher than figures in the news?
What does the IndiaMTF dashboard show?
Where does the data come from?
How often is the data updated?
Is this investment advice?
Glossary
The MTF terms used in this guide and by brokers. For how IndiaMTF defines its own figures — combined book, share of book, exit days — see the methodology page.
- Margin Trading Facility (MTF)
- A SEBI-regulated arrangement under which a broker funds part of a delivery purchase of eligible shares, holding them as pledged collateral and charging interest on the amount lent.
- Funded amount
- The part of the purchase the broker pays for. Interest is charged on this, not on the whole position.
- Initial margin
- The part of the purchase you pay upfront, in cash or approved collateral. It is set per stock from its risk, so it differs between stocks.
- VaR + ELM
- Value at Risk plus Extreme Loss Margin — the exchange's measure of how far a stock could fall in a day, used to set its minimum margin. A riskier stock needs more margin and gets less leverage.
- Leverage
- How much stock your own money controls. At 4×, ₹1 lakh of your own buys ₹4 lakh of stock and the broker lends ₹3 lakh — three times your money, not four.
- Pledge
- The legal mechanism that makes MTF shares collateral. They stay in your name in a separate tagged demat account, but cannot be sold without clearing the funded amount.
- Unpledge
- Releasing pledged shares, on sale or once the funded amount is repaid. Depositories charge a small fee for each pledge and unpledge.
- Haircut
- The discount a broker applies to a security's market value when counting it as collateral. A 20% haircut means ₹100 of stock covers only ₹80 of margin.
- Group I securities
- The most liquid, least volatile category of stocks and ETFs, as classified by the exchanges. Only Group I securities may be funded under MTF.
- Mark to market (MTM)
- Revaluing a position at each day's closing price. Under MTF it determines whether your margin still covers the funded amount.
- Maintenance margin
- The minimum margin a position must keep after purchase. Falling below it triggers a margin call.
- Margin call
- A broker's demand for more cash or collateral when a falling price leaves your margin short of the required level.
- Margin shortfall
- The amount by which your margin falls short of what the broker requires. It must be made good by the deadline, or the position can be sold.
- Square-off
- Closing a position. A broker may square off an MTF position itself if a margin call is not met or the stock leaves the eligible list.
- T+1
- Trade day plus one: Indian equities settle the trading day after the trade, and MTF interest typically starts accruing from T+1.
- Rights & Obligations document
- The SEBI-mandated agreement a client accepts before using MTF, setting out the broker's and client's duties, including margin-call and square-off terms.