How does MTF work?

You place a buy order and choose the MTF option instead of a regular delivery order, and the broker funds a portion of the purchase value, commonly requiring you to put up somewhere between 20% to 50% or more of the value yourself depending on the specific stock’s SEBI-mandated margin category, while the broker covers the rest as a funded position. The shares purchased under MTF are held as collateral by the broker for the duration of the loan, and you’re charged daily interest on the funded (borrowed) portion until you either sell the position or convert it by paying off the funded amount to take full, unencumbered delivery. If the stock price falls significantly and your margin (the collateral value relative to the loan) drops below the required maintenance level, you’ll face a margin call requiring you to add funds, and if unaddressed, the broker can liquidate the position to recover the funded amount. You calculate the interest cost over your expected holding period before using MTF, since a position that seems profitable on price movement alone can turn marginal or unprofitable once accumulated interest is factored in.