You may use the stocks held in your demat account to get additional margin to buy stocks in Equity segment (via MTF) or to take positions in derivative segment. Read here to know more about MTF trading.

Here, we will see how much leverage will be added to you in F&O segment if you provide stocks as collateral. There are 2 basic points which needs to be noted here.

  1. Value of stocks after haircut as only that value will be added as collateral limit
  2. 1:1 Cash : Collateral ratio required. At any point, minimum 100% of the collateral value should be available as cash i.e., the ledger credit, to avail collateral benefit


  Let’s understand this with an example

Scenario

Actual Value of Collateral Stock

Value of Collateral Stock after haircut

Ledger Balance

Limit  provided

1

520000

500000

500000

500000+500000=1000000

2

520000

500000

300000

300000+300000=600000

3

520000

500000

200000

200000+200000=400000

4

520000

500000

100000

100000+100000=200000

 

You may notice here that as the ledger credit reduces the collateral value considered to provide limit also reduces. This is because, at any point of time, minimum 100% of the stock collateral value should be available as clear ledger credit.  In other words, the cash collateral ratio at any point of time should be 1:1. From scenario 2, the ledger balance is lesser than the value of stock collateral, hence, the limit provided based on stocks pledged is restricted to the cash credit available thus making the cash collateral ratio to 1: 1

Note: ICICI BANK and ICICI Prudential shares will not be accepted as collateral.

 

Also Read

How to pledge stocks?

MTF

Stocks accepted as collateral