What is Shares as Margin facility?
Shares as Margin is a facility with which you can generate instant trading limits using your existing shares lying in your demat account.
Why do I need Shares as Margin facility?
In situations where you are short of funds to take a position and would need some time to gather the required amount, Shares as Margin can help you generate limits instantly to trade in products like Flexi cash/ Margin Client mode and Margin broker mode. By using Shares as Margin, you can be assured that you will not be missing any market opportunity due to temporary shortage of funds.
How does Shares as Margin work?
All you need is to block the shares in your demat equivalent to the amount of margin that you require to take a position and within seconds you have the required margin to buy that stock. To view how to use Shares as Margin, click here.
What are the Benefits of investing through SAM?
No need to wait till funds are gathered
Simple, hassle free process to generate limits
Can be combined with cash to pay margins i.e. half of the required margin can be taken under SAM and half with cash
The shares can be unblocked any time after producing the required amount in cash
Other important details related to SAM:-
Shares as Margin facility can only be used for Margin products i.e. Flexi cash/ Margin client and Margin broker mode in cash segment
For positions taken under Flexi Cash/ Margin client mode through Shares as Margin, interest charged on daily basis is 0.05% in case of I-Saver and I-Secure plans
In case of Prepaid plans, the interest charged is lesser. Click here to view interest rates for prepaid plans
Shares as Margin is available for selected stocks. You can check the list under Equity > Holding & Services > Stock List on the site
Interest charged on positions taken with Shares as Margin is calculated as per T+1 criteria
A haircut percentage has been allotted to each stock depending on their associated risks and so, the limit will be generated post deducting the haircut percentage
Illustrations explaining how to use SAM and interest charged on SAM
A. When position is taken by paying initial margins partially by SAM and partially by cash
Mr. A took a position in Margin Trading in BSE in the stock XYZ trading at 100 and bought 1000 quantity of the stock. The initial margin to be paid was 27%.
Therefore, he has to pay 27,000 to take a position of 1,00,000
He decided to pay 7,000 in cash and block shares in his demat worth 20,000 under Shares as Margin.
He therefore, took a position of 1,00,000 by blocking his existing shares worth 20,000 and paid only a small amount of 7,000 in cash.
Interest Charged:
If 27,000 is paid as initial margins such that 20,000 paid through SAM and 7000 paid as Cash, interest charged will be:
Applicable on SAM and outstanding amount, therefore, 100000-7000= 93,000
Interest charged= 0.05% of the total outstanding amount (i.e. 93,000)= 46.5 daily
The interest on limits generated through SAM will be charged from T+1 day at 0.05% on a daily basis= Interest on 20000
The interest on outstanding amount (excluding margin paid in cash) will be charged at 0.05% from T+3 days= Interest on 20,000 + Interest on outstanding amount 73000
Where 'T' is the transaction day
B. When position is taken by paying initial margin completely by SAM
In the same example, to pay 27000, Mr. A decides to block his existing shares worth 27,000 under Shares as Margin. In this way, he is able to take a position of 100,000 without paying any cash margins.
Interest Charged:
If 27,000 is paid as initial margin completely through Shares as Margin, interest charged will be:
Applicable on total position value, therefore on 100,000
Interest charged= 0.05% of the outstanding amount= 50 daily
The interest on limits generated through SAM will be charged from T+1 day at 0.05% on a daily basis= Interest on 27000
The interest on outstanding amount (remaining amount) will be charged at 0.05% from T+3 days= Interest on 27,000 + Interest on outstanding amount 73000
Where 'T' is the transaction day