What Is MTF? 5 Reasons to Consider MTF on Dhan

Key takeaways:

Margin Trading Facility (MTF) allows investors to buy eligible stocks by paying only a portion of the trade value upfront, with the broker funding the rest at a declared interest rate.
Dhan's MTF covers 1,700+ eligible stocks across sectors, giving investors access to a far wider universe than platforms that restrict MTF to a handful of large-cap names.
Dhan charges MTF interest on a five-slab structure starting from 12.49% per annum (0.0342% per day), with rates applied as flat slab rates on the total funded amount.
Brokerage on MTF trades is charged at ₹20 or 0.03% per executed order, whichever is lower.
MTF positions on Dhan carry no fixed holding period. Investors can hold funded positions for as long as the required margin is maintained and interest is paid.
Dhan's MTF calculator helps investors understand the exact capital required and the cumulative interest cost before entering a funded position.

Most investors think about their portfolio in one of two ways: the capital they have, and what it can buy. Margin Trading Facility (MTF) introduces a third variable. It lets investors buy eligible stocks by paying only a portion of the total trade value upfront, with the broker funding the rest. While MTF has been available in India for years, its adoption is often limited by restricted stock eligibility, complex processes, and limited flexibility across brokers.

Dhan has reimagined MTF to make it more accessible and useful for retail investors through its industry-leading features. Let's explore five reasons why investors must try Dhan's MTF offering.

What is Margin Trading?

Margin trading is a facility that enables investors to purchase stocks without paying the entire transaction amount at the time of purchase. For example, if the investor wants to purchase shares worth ₹1,00,000, they need to pay only ₹25,000, and the broker pays the remaining ₹75,000 in the case of MTF. However, the investor is liable to pay interest on the amount funded.

MTF is useful for investors who want to build or scale a delivery position in a stock without waiting to accumulate the full capital. In MTF positions, interest is charged daily on the amount funded and if the stock price drops, the investor has to maintain the required margin or face forced liquidation.

5 Reasons to consider MTF on Dhan

Let's explore five reasons investors may consider Dhan's MTF offering.

Broad universe of 1700+ eligible stocks

Most brokers offer MTF for a narrow list, often limited to the top 200 to 300 heavily traded large-cap stocks. This means that investors are not able to use MTF to accumulate positions in mid-cap or sector-specific stocks, where longer-term conviction often resides.

Dhan's MTF offers a wide range of 1700+ MTF-eligible stocks. Additionally, the eligible stocks list is maintained in line with SEBI's Group A securities guidelines and updated as exchange classifications change.

Competitive funding rates

The cost of borrowing is a critical factor in margin trading. High interest rates can erode potential returns, especially if the position is held for an extended period. Dhan offers MTF funding rates starting at 12.49% per annum, with a transparent 5-slab interest structure based on the funded amount.

Interest is calculated daily starting from the T+1 settlement date of the purchase and posted on the investor's ledger weekly. It provides transparency and helps investors understand the cost of funding before and during the trade, enabling investors to plan their positions accordingly.

Transparent MTF rates

Dhan clearly discloses MTF-related charges. MTF trades on Dhan attract brokerage of ₹20 or 0.03% per executed order, whichever is lower. Beyond brokerage, investors should account for pledge and unpledge charges of ₹15 per ISIN + GST. Furthermore, when an MTF position is sold, DP charges of ₹12.50 + GST per ISIN instruction also apply.

Dhan introduced automatic pledging for MTF purchases effective from February 24, 2025, in which stocks purchased using MTF are auto-pledged without the need for an NSDL OTP confirmation. The pledge charge is still applicable, but the manual process of confirming the pledge separately has been eliminated, making the MTF workflow faster and smoother.

Flexible holding period

Unlike intraday margin, which must be squared off on the same day, MTF positions can be held for longer durations. Dhan's MTF carries no fixed holding period. Funded positions can be held for as many days as the investor chooses, provided the required margin is maintained on a daily basis, and interest on the funded amount continues to be paid.

This flexibility allows investors to align their MTF positions with their market outlook and investment time frame. To prevent involuntary liquidation, investors can also track their MTF ledger, margin requirements, and margin calls on Dhan's platform.

MTF estimator

Many investors enter MTF positions without understanding the full cost implications, leading to unexpected interest charges and margin calls. Dhan's MTF calculator addresses this issue directly. Investors input the stock name, buy price, sell price, quantity, and holding period to estimate leverage, interest amount, funded by Dhan, returns without MTF (%) and returns with MTF (%) for the specified period.

Thus, it helps investors decide whether buying a particular MTF position is right for them or not, based on their risk tolerance and return goals. It also promotes disciplined planning and discourages investors from taking leveraged positions based solely on market momentum.

Wrap up

Margin Trading Facility works best when investors use it with complete visibility into the costs involved and a clear overview of the stock they are funding. Dhan's MTF offering is built on features like a wide eligible stock universe, a transparent multi-slab interest structure, clearly stated charges, no forced holding limit, and a calculator that helps estimate MTF cost before the trade is placed.

However, MTF involves leverage, interest costs, and market risk. Therefore, it is important for investors to read the terms, understand the costs, and evaluate their risk tolerance before taking MTF positions.