What Is Margin Trading Facility (MTF) in India?

If you have ever looked at a stock you wanted to buy but found yourself short on funds, Margin Trading Facility (MTF) is the answer. MTF allows you to buy more stocks than your available capital permits – by borrowing a portion of the purchase amount from your broker.

This article explains what MTF is, how it works, what makes it different from a regular stock purchase, which stocks are eligible, and how Lemonn offers one of the most affordable MTF rates in India at just 10.95% per annum.

MTF in Simple Words

Think of MTF like a home loan – but for stocks instead of property.

When you buy a house worth Rs.50 lakh, you typically pay 20% as a down payment (Rs.10 lakh) and borrow the remaining 80% (Rs.40 lakh) from a bank. You pay interest on the borrowed amount while the house sits in your name and appreciates in value.

MTF works exactly the same way. You pay a portion of the stock’s value from your own pocket, and your broker lends you the rest. The stocks remain in your demat account (pledged as collateral), and you pay interest on the borrowed amount until you repay it.

The key difference: unlike a home loan that runs for 20 years, MTF positions can be held for as long as you want – days, weeks, or months – as long as you maintain the required margin and service the interest.

How MTF Works: A Step-by-Step Example

Here is a concrete example to make this tangible:

You have Rs.10,000 in your trading account. You want to buy shares of a company trading at Rs.100 per share. Normally, you can buy 100 shares.

With 4x MTF leverage on Lemonn:

• Your capital: Rs.10,000
• Lemonn funds: Rs.30,000
• Total buying power: Rs.40,000
• Shares you can buy: 400 shares

You now hold 400 shares instead of 100. If the stock rises to Rs.120, your profit is Rs.8,000 (400 shares x Rs.20 gain) instead of Rs.2,000 (100 shares x Rs.20 gain).

The cost: You pay 10.95% per annum interest on the Rs.30,000 borrowed from Lemonn. For 30 days, that works out to approximately Rs.270 in interest – a small fraction of your potential gains if the stock moves in your favour.

MTF vs Normal Stock Purchase

Aspect	Normal Buy	MTF Buy
Capital required	Full purchase price	20-25% of purchase price (own margin)
Buying power	Equal to your capital	Up to 4x your capital
Interest cost	None	10.95% p.a. on borrowed amount (Lemonn)
Stock ownership	Full ownership	Pledged in your demat; you hold them
Holding period	Unlimited	Unlimited (as long as margin maintained)
Margin call risk	None	Yes, if stock price falls below threshold
Profit potential	Based on own capital	Amplified by leverage multiple
Loss potential	Limited to own capital	Can exceed own capital if stock falls sharply

Which Stocks Are Eligible for MTF?

Not all stocks can be bought on MTF. SEBI mandates that only Group 1 securities – the most liquid, large-cap stocks – are eligible for margin trading. These are stocks with high trading volumes, low impact costs, and strong price discovery.

On Lemonn, over 2,200 stocks are approved for MTF. This includes most Nifty 500 companies, leading mid-caps, and several sector leaders. The list is updated periodically based on SEBI’s stock classification criteria.

To check whether a specific stock is eligible, search for it in the Lemonn app – eligible stocks will show the MTF toggle option on the buy screen.

MTF on Lemonn: What You Get

• Interest rate: 10.95% per annum – one of the lowest in India
• Maximum leverage: up to 4x your available margin
• Eligible stocks: 2,200+ SEBI-approved securities
• No hidden charges: zero account opening fee, zero AMC
• Digital activation: MTF can be activated entirely within the Lemonn app
• Transparent interest: daily accrual, visible in your account

Lemonn’s 10.95% p.a. rate compares favourably with other major brokers who charge anywhere from 12% to 18% per annum. Over a 6-month holding period, this difference can save you thousands of rupees in interest costs.

How to Activate MTF on Lemonn

Activating MTF on Lemonn takes less than 5 minutes and is entirely digital:

1. Download the Lemonn app and complete your account opening (free, zero charges).
2. Go to Profile > Settings > Margin Trading Facility.
3. Read and accept the MTF terms and conditions.
4. Complete the e-sign process using your Aadhaar OTP.
5. Your account is now MTF-enabled – usually within minutes.
6. Add funds to your account as margin.
7. Search for an MTF-eligible stock and toggle the MTF option before placing your buy order.

Frequently Asked Questions