What It Means
MTF (Margin Trading Facility) is a SEBI-regulated service that lets you buy stocks by paying only part of the value upfront — your broker funds the rest as a loan, and the shares you buy get pledged back to the broker as collateral until you repay it.
How It Works
SEBI sets a minimum margin (typically 25% of the trade value for most MTF-eligible stocks), and the broker funds the remainder. You pay daily interest on the funded amount for as long as you hold the position — there's no expiry forcing an exit, unlike a futures contract.
Example
Vikram wants to buy 200 shares of a stock trading at ₹300 — a ₹60,000 position. At a 25% margin requirement, he puts in ₹15,000 and the broker funds the remaining ₹45,000, taking the shares as collateral. He now owes daily interest on that ₹45,000 for as long as he holds the position.
Warning
Interest is charged daily on the funded amount whether the stock moves or not. A position that goes nowhere for two months still costs you every day — that cost has to be cleared before you're even at breakeven.