Zerodha founder Nithin Kamath announced the much-awaited launch of Margin Trading Facility (MTF) in a post on X, marking the company’s entry into a product already popular in the market. “I haven’t been sure about this product for a long time because of obvious reasons,” Kamath wrote in X, citing risks associated with leverage and borrowing costs.
So what exactly is MTF? MTF allows traders to buy stocks for delivery without the full funds required. Traders can borrow up to 80% of the trade value, with an interest rate of 0.04% per day (₹40 per lakh). The position remains active until settled or closed.
Despite initial hesitation, Kamath pointed out that MTF has grown significantly in recent years, with most brokers offering it. “Considering the number of customers asking us for the feature, it didn’t make business sense for us to not offer it,” he said.
Enabling MTF requires explicit consent. Accounts with PoA or DDPI can activate it instantly, while others may take up to a day. Once enabled, users can place MTF orders on Zerodha’s Kite platform by selecting the MTF option in the order window.
The risks? "Customers who trade for delivery tend to ignore the impact of the cost of borrowing, and there's always the risk of the trade going against them, which leads to a bigger loss," Kamath elaborated. Falling stock prices may force traders to add margin or close their positions.
Zerodha charges 11.5% annual interest for MTF, higher than its Loan Against Securities (LAS) product. Kamath, however, said Zerodha will not actively promote MTF to customers. “We’ll never push this to customers and trigger them to trade,” Kamath affirmed, reiterating the company’s commitment to responsible trading. With MTF now available, Zerodha offers a cautious but comprehensive tool for traders seeking leverage, balancing customer demand with the inherent risks of the product.