Is interest applicable if I have pledged shares and taken an F&O position?
Overnight F&O positions require:
- A minimum of 50% of the margin to be maintained as cash or cash equivalent collateral.
- The remaining can be brought as cash or pledged margins (after the applicable haircut).
- If 50% of the margin is not maintained as cash or cash equivalent collateral, interest will be charged on the shortfall amount @ 0.05% per day.
For example:
| Particulars | Mr Ravi | Mr Rahul | Mr Hari |
|---|---|---|---|
| Position | Nifty Futures Long | Nifty Futures Long | Nifty Futures Long |
| Available Cash Margin | Rs. 1,00,000 | Rs. 75,000 | Rs. 50,000 |
| Available Pledge Margin | Rs. 2,00,000 | Rs. 2,00,000 | Rs. 2,00,000 |
| Total Available Margin | Rs. 3,00,000 | Rs. 2,75,000 | Rs. 2,50,000 |
| Margin Required | Rs. 1,50,000 | Rs. 1,50,000 | Rs. 1,50,000 |
| Margin Shortfall | NIL | NIL | NIL |
| Cash Margin Required (50%) | Rs. 75,000 | Rs. 75,000 | Rs. 75,000 |
| Cash Margin Shortfall | NIL | NIL | Rs. 25,000 |
| Interest Charged (0.05% per day) | NIL | NIL | Rs. 12.5 |
As you can see, Mr Ravi and Mr Rahul have maintained sufficient cash margins (50% of the margin requirement) for their respective F&O positions.
However, though Mr Hari has sufficient margins for his position, he does not meet the condition of maintaining 50% of the margin requirement as cash. Hence, he is charged interest at 0.05% per day on his cash margin shortfall of Rs. 25,000.
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