Brokerages’ margin trade funding books swell 2.3x to cross Rs 1 trillion mark in August

MTF is a facility that brokerages offer their clients to do leveraged trading for a fee wherein the interest rate varies from 13-17%. While the percentage of margin being offered varies from one brokerage to another, on an average this is 70% more of your own fund on a given day; there are also brokerages that offer—on a day when the market is rallying—five to seven times of your own fund.

Also, some brokerages like HDFC Securities offer MTF for 270 trading days while most others give it for a week or month. At the end of the given date, if your MTF stocks are not taken into delivery, because you don’t have funds to convert them into delivery, the brokers have the power to liquidate those stocks and recover their funds.

This higher loan growth comes amidst the muted demand from segments of the credit market — be it demand for home, auto or personal loans, leave alone corporate demand, which was the slowest at 3.8% so far this fiscal.

Retail credit, which comprises 33% of bank loans, has grown by under 10% in Q1. Home loans, which remain the largest constituent of retail credit with 50% share, are also slowing and corporate loans, which account for 38% of bank loans, grew only 3.8% till July. Of the Rs 171-trillion corporate credit pie, banks account for 40%, while capital markets contribute to over a third. Only loans to small businesses, which constitute 17% of the overall credit, have been growing steady at 14% this fiscal. Gold loans are another exception clipping at the fastest pace of 31%.