When you request MAS, there are specific rules defined by each broker, so you have to check with your broker what scheme he is providing against MAS.
A haircut is the arbitrary reduction in the value of a security to calculate the risk cover. A % haircut will be applied, which calculate collateral margin over holdings. A haircut of 10% would mean that if you pledged stocks worth Rs 1 lakh, Rs 90,000 (90% of 1 lakh) will be added as a collateral margin to your trading account.
Cash to collateral ratio is maintained at 50:50 which means 50% of the margin needs to compulsorily come in cash and the remaining 50% can be in terms of collateral margin.
You can use this facility for equity Intraday and equity future and for writing Options of equities, indices, and currencies. You will not be able to use this margin to buy Options or take further positions on the equity segment.
There are specific securities which can be pledged. You need to review the list of securities with your broker.
A stock once pledged will stop showing up in holdings on the trading platform and you will not be able to sell it unless you unpledged. However, you are entitled for all corporate actions on your securities like bonus issue, stock split, dividend etc.
Margin Against Shares comparison
With MAS, you can use your long term investment as cash value for day to day trading of course with some limitations. Please read the complete brochure for more information and details of charges, cash vs collateral ratio and list of securities.
Frequently Asked Questions
How Margin Against Shares actually works?−
If he wants to pledge 1000 Share of YYY which are trading @100 Rs per share in order to take a position in NIFTY future, the value of his pledged request will be
If applicable haircut on pledged request is 25%, that means Rs 25,000 brokers keep for risk cover and release 75,000 for collateral margin. This amount will show as collateral value in your account.
How to use Margin Against Shares fund?+
Assume client want to invest in 3 lots of NIFTY future, which require Rs 136,000. As per broker cash to collateral ration 50:50, Rs 68,000 can be used from collateral value and Rs 68,000 is required as cash in your account.
If client does not have enough cash, then either the order may not execute or the broker is going to charge interest per day for the debit balance in your account. Some brokers provide debit balance with interest and some brokers does not allow to trade.
Can I pledge bank fixed deposits-RBI t-bills-govt securities-bonds also?+
Usually not, but you can further check with your broker.
What if I incur losses in trading using my collateral margin?+
If you start running trading losses on F&O using collateral margin, and don't provide the requisite marked to market (MTM) additional capital, the broker will have the right to square off your pledged holdings to make up for the losses.
Does the value of the collateral vary everyday based on the underlying value of the pledged holdings?+
Yes, the margin given will change everyday based on the value of collateral.
How to get collateral money in your account?+
To avail MAS facility, clients need to contact the broker to release collateral money against his securities. Some brokers provide this feature online and some brokers accept only email request.
How much time it will take to get collateral margin for trade?+
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