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What is MTF (Margin Trading Facility) in India
MTF lets you buy more shares than your own capital allows by borrowing the shortfall from your broker at an interest rate. The shares themselves act as collateral. SEBI regulates which stocks are eligible and the maximum leverage allowed.
In one line
Margin Trading Facility (MTF) is a SEBI-regulated product that lets you buy eligible shares using a combination of your own funds and a broker loan, with the purchased shares pledged as collateral, and interest on the borrowed amount is charged daily from the next day of the purchase, typically in the range of 10 to 18% per annum depending on the broker as of 2026.
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How MTF works: the mechanics
When you enable MTF on your trading account, the broker extends credit up to a SEBI-defined limit for eligible securities. Say you want to buy shares worth 1 lakh rupees but only have 40,000 rupees in your account. Under MTF the broker funds the remaining 60,000 rupees. The shares are held in a pledged state in your demat and serve as the collateral for the loan. You receive dividends and remain the beneficial owner, but you cannot freely transfer or sell the pledged shares without closing the loan.
The interest clock starts from the day after purchase and runs daily until you repay the borrowed amount. Brokers charge interest on the exact amount borrowed, not on the full purchase value. The interest rate is specified in the broker's MTF product terms. SEBI mandates transparency on the rate, so it is disclosed on the broker's platform before you activate the facility. Rates vary across brokers and can depend on the tenor of the borrowing.
Eligible stocks and the margin call risk
Not every stock qualifies for MTF. SEBI and the exchanges publish lists of approved securities, which are generally large-cap and liquid stocks with lower volatility. Stocks under ASM or GSM surveillance or those outside the approved list are not eligible for MTF funding. Brokers may further restrict the list based on their own risk assessment.
The risk that distinguishes MTF from regular delivery is the margin call. If the value of the pledged shares falls below a specified threshold relative to your outstanding loan, the broker issues a margin call requesting you to either top up your funds or partially repay the loan. If you cannot meet the margin call, the broker can liquidate (sell) the pledged shares to recover the loan, regardless of your view on the stock. This forced selling at a loss is the defining risk of using MTF on a stock that declines sharply.
Tax and practical considerations
For tax purposes, shares bought on MTF are treated exactly like shares bought with your own funds. The holding period starts from the trade date, and the capital gains tax rules (STCG at 20%, LTCG at 12.5% above 1.25 lakh) apply normally when you eventually sell. The interest you pay on the MTF loan is a separate cost that is not offset against capital gains but may be deductible if you report trading as business income and consult a tax advisor.
MTF is most commonly used by investors who have a conviction on a stock but want to deploy more capital than they currently hold, or by traders who want to carry a position overnight without the restrictions of intraday leverage. It is not a product for volatile, short-term trades because the interest compounds daily and erodes returns on a narrow margin. The longer you hold a leveraged MTF position, the more the interest cost eats into any paper gains.
FAQ4 reader questions · AEO-eligible
Common questions on what is mtf.
Is MTF the same as intraday leverage?
No. Intraday leverage (MIS) must be squared off the same day. MTF lets you carry a funded position overnight and beyond, for as long as you service the interest and maintain the required margin against the loan.
What is the risk of MTF?
The primary risk is the margin call. If the stock falls and the loan-to-value ratio breaches the broker's threshold, you must top up funds or the broker will liquidate your shares. A leveraged position that falls against you can lead to losses larger than your initial capital.
Which brokers offer MTF in India?
Most major Indian brokers including Zerodha, Upstox, Motilal Oswal, ICICI Direct and others offer MTF on eligible securities. Terms, eligible stocks and interest rates vary by broker.
Can I get dividends on MTF-funded shares?
Yes. You remain the beneficial owner of the shares even when they are pledged as collateral for the MTF loan. Dividends are credited to you normally.
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