March 25, 2026
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How MTF fees affect your choice of demat account

By admin / March 25, 2026

AMC, brokerage charges, and account opening fees are the first things that most buyers look at when they compare Demat accounts. However, the Margin Trading Facility (MTF) fees, especially the daily interest on borrowed funds, are often the most important thing that traders consider when choosing a broker. If you want to use leverage, high MTF interest can make even a “free” account pricey.

Interests Every Day: The Real Cost in the Long Run

MTF interest (usually 12–18% per year, charged every day) keeps adding up as long as you have a leveraged stake. As an example:

  • A loan of ₹3 lakh at 15% p.a. costs ₹123 per day.
  • Once every 45 days, interest of ₹5,535 charged
  • After 90 days, it’s worth about 11 070 rupees.

This ongoing cost is often higher than brokerage, AMC, or other fees put together, and traders use it as the main reason they choose or reject a Demat service.

Impact on Reasonable Holding Times

MTF fees have a big effect on how long you can hold trades without losing money:

  • When the hold period is very short (1–3 weeks), interest is very low, so higher rates are okay.
  • Medium holds (1–3 months) → interest starts to matter; low rates (12–14%) are necessary
  • Longer holds → interest rules, which usually makes MTF impossible to use.

Extra MTF fees that add up.

Besides interest, keep an eye out for these other, less obvious costs:

  • 18% GST on interest rates
  • DP charge ₹13.5 to ₹20 plus GST per share per day to sell.
  • Charges pledged or not pledged
  • Higher margin percentage on some stocks means less borrowing, which means the cost of borrowing money is higher.

Brokers that look cheap on trading can hide high total MTF costs behind these layers.

MTF Fees as a Way for Brokers to Stand Out

When looking at different companies, MTF interest rates are often what set the winners apart:

  • Discount brokers that charge 15–18% MTF interest are fine for zero-brokerage delivery, but it costs a lot to use leverage.
  • The rates at mid-level providers, which are 12–14%, are better for using both cash and MTFs.
  • Brokers that offer better rates for high-volume or funded accounts are great for frequent leveraged trades.

Effects on the mind and in real life

High MTF fees really get in the way:

  • Not wanting to make risky trades leads to missed chances
  • Early exits to keep people from investing → cutting wins short
  • People tend to choose brokers with cheaper rates, which leads to more satisfaction and loyalty.

The MTF charges, especially interest, are one of the main reasons you choose which Demat account to start. They decide if leverage is affordable, how long you can hold on to your positions, and the general economics of trading. When charges are too high, MTF isn’t useful for most techniques. When charges are too low, it can be used to its fullest.

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