How to use Mutual fund as collateral on Zerodha (2024)

FAQs

Can I use mutual funds as collateral? ›

A growing trend among retail investors in India shows they are increasingly using their mutual fund units as collateral for short-term loans, rather than liquidating their investments. This strategy allows investors to meet immediate financial needs while preserving their long-term investment goals.

Step 1: Log in to the Kite app or portal. Step 2: Add the funds you wish to invest into your watchlist. Step 3: Shortlist the fund you want to invest in. Step 4: Click on the 'buy' option.

The exchanges require that 50% of the margin for F&O positions must be in cash or cash equivalent collateral, while the remaining 50% can be in non-cash collateral margin.

Use of collateral margins from pledging the holdings will only be allowed with a positive cash balance. The cost of pledging is ₹30 + GST per request, per ISIN, irrespective of the quantity pledged. There are no charges for unpledging.

Which stocks and mutual funds can be pledged with Zerodha for collateral margins? The list of stocks and mutual funds that can be pledged with Zerodha for margins and the applicable haircut % can be found by visiting zerodha.com/approved-securities. They are divided into cash and non-cash components.

While mutual funds cannot be purchased on margin, they can be used as collateral for margin purchases of other securities in some cases. Requirements vary between brokerage firms, but generally, the fund must be held for 30 days to be used as collateral for margin.

Can I pledge my tax saving elss fund? It has a lock in period of 3 years. As it is already in lock-in. It cannot be pledged.

Zerodha offers brokerage free Mutual Fund investment. They don't take a commission from customers or AMCs. Zerodha offers direct mutual funds. This gives additional earning of 1% to 1.5% per year as AMCs pass-on the additional saving from not paying commission to the broker to the customers.

It is absolutely safe, they hold your MF units in demat, that means you are in full control of it. Even if Zerodha goes bankrupt, your MF units are still safe in your demat account.

Which Zerodha app is best for mutual fund? ›

Zerodha Coin is India's largest zero-commission direct mutual funds platform that has helped Indians invest over Rs 70,000 crores. Why Coin? Easy Systematic Investment Plans (SIPs) creation and automation.

The collateral margin from a successful pledge request will be credited to the Zerodha account on the next trading day. Holdings can only be pledged after they're settled in the demat account, i.e., from T+1 onwards. Fractional units of both Liquid BeES and mutual funds cannot be pledged.

Process of Pledging Shares on Zerodha

Pledging shares in Zerodha is a simple process: Zerodha Console: Log in to your Zerodha Console account. Portfolio and Holdings: Navigate to the “Portfolio” section and then to “Holdings.” Select the Security: Choose the security you want to pledge from your holdings.

Interest rate is 11.5% pa.

While mutual funds cannot be purchased on margin, they can be used as collateral for margin purchases of other securities in some cases. Requirements vary between brokerage firms, but generally, the fund must be held for 30 days to be used as collateral for margin.

Zerodha does not accept fixed deposits or bank guarantees as collateral for margins due to our operational and reconciliation constraints.

If you don't have sufficient cash margin and the shortfall is funded by non-cash collateral, there will be a delayed payment charge of 0.035% per day or 12.5% p.a on the shortfall in the cash margin requirement. Read more about the delayed payment (interest) charges here .