As per Exchanges, on an end of day open position basis, only 50% of margin required to trade F&O can be brought in by the way of collateral (margin received form pledging securities). The remaining 50% has to brought in as cash. If the client doesn’t bring in cash, a brokerages working capital will be getting utilized. It is a common practice that a brokerage will charge an interest rate if clients end up using their personal funds.
Assume you have pledged Rs 1lk worth of stock for which after haircut you have received Rs 70,000 to trade F&O. Assume that you now want to take F&O positions worth Rs 1lk.
Like I said earlier 50% of this 1lk has to come in cash. But assume you have only Rs30,000 cash in your account. So you use the Rs 70,000 in collateral margin and Rs 30,000 in cash to buy Rs 1lk. But in reality only Rs 50,000 of your collateral margin + Rs 30,000 of your cash + Rs 20,000 of brokers cash will be getting blocked on this trade.
So this Rs 20,000 is basically the debit balance for the day, and a daily interest could be applicable for this debit.
So at the end of every day,
Cash balance - 50% of ( margin blocked + long option value) = Negative (it is the debit balance for the day).
Interest will be applicable on this negative value.