Margin Trading for NRIs (Non-Resident Indians) | 2022


01 Nov 2021 | 5 min read

In the stock market, the term Margin Trading Facility (MTF) refers to the process where investors into the stock market purchase more stocks than they can afford. The stockbroker pays for the due amount and levies interest on it. 

Besides, Margin is a partial amount that is paid by the investor. In addition to this, Margin Trading is a simple way of making money by means of NRI investment in India. 

Let’s take a look at the different and core elements of Margin Trading for NRIs. 

Difference Between Normal Trading and Margin Trading 

Without hovering around, take a look at the following differences between Normal Trading and Margin Trading to perceive them smoothly: 

Normal Trading 

  • Being an NRI, in normal trading, you can place an order and the full trading value gets debited from your NRI bank account once the order is carried out. 
  • The shares get credited in your NRI Demat account in Trading Day plus 2 days. 

Margin Trading 

  • Being an NRI, in Margin Trading, you can place an order and only the margin amount gets deducted from your account on order implementation. 
  • The shares get credited into your NRI Demat account within Trading Day plus 2 days. The remaining amount gets funded by the stock broker as a short-term loan to the investor. 

Benefits of Doing Margin Trading 

Following are the benefits of Margin Trading that you can enjoy on executing it. Have a look at the below-stated points to perceive them: 

  1. The facility extends higher buying power with limited cash balance to NRI investors. 
  2. It facilitates them in earning more profits with small investments. 
  3. Positions can be deferred up to T+N days.* 
  4. Similar to normal trading, Margin Trading is also regulated by the SEBI and the Exchanges. 
  5. Within the facility, you can get up to 75% of the trading amount on the selected stocks. 
  6. You can pay the margin amount in cash or against the shares in your Demat account. 
  7. Inactive stocks in the Demat account can be taken into usage for the margins. 

*Note: T stands for the day of trading and N stands for the number of days a position can be carried forward to. Moreover, N also depends upon the stock broker's terms and conditions. 

Ways to Do Margin Trading 

There are only a few Indian brokers available in the industry that offer the Margin Trading Facility (MTF) to Non-Resident Indians (NRIs). 

You can execute Margin Funding in the following 2 ways:  

  • Cash funding (short-term loan) 
  • Margin against shares in the Demat account 

Must-Know Things Before Doing Margin Trading  

There are certain facts about Margin Trading that you must remember before you opt for the Margin Trading Facility. Take a look at them: 

  • Only the stocks of the particular companies are available for Margin Trading as stated by the SEBI and Exchanges of the Indian Stock Market. 
  • The approval on the percentage of margin is also passed by the SEBI and stock exchanges. 
  • You can avail of up to 75% of the trading value as a margin amount.  
  • Payment terms, maximum loan duration, and interest rates differ as per the broker. 
  • NRE accounts aren’t eligible for this facility, only the funds routed via the NRO account can avail of it. 
  • The Margin Trading Facility (MTF) is available for selective stocks trading only on the National Stock Exchange. 

NRI Stock Brokers Offering Margin Trading Facility 

At present, only Tradeplus is there which offers Margin Trading for NRIs with a brokerage charge of 0.40% (NRE) / 0.30% (NRO). 

The Final Stroke 

To conclude, without ideal guidance, it isn’t easy for NRIs to trade in the Indian stock market thanks to some limitations. 

Therefore, if you are an NRI then before you execute Margin Trading in India, you must avail of proper guidance of market and legal experts to attain a hassle-free investment experience. 

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