What is collateral margins?

Collateral refers to any asset that can be provided to the lender to manage his risk and to recover the obligation if and when required. Broker’s collects margins in the form of Cash, Collateral (Security), Bank Guarantees, Fixed Deposits etc. A broker usually gives margin to its clients for the securities held by the client in their demat account. This is to increase participation. There is a haircut involved on the equity value of the securities and a cash margin has to be provided to manage MTM before a collateral margin is provided. Every broker may have a different policy for providing a collateral margin. Hence its better to check with your broker to know what they support.

1 Like

If you hold some shares in your demat account and pledge it as collateral to your broker, the broker will provide you additional margin in your trading account. This margin cannot be used for buying additional shares but can be used to trade in FnO. This is collateral margin. If you are a client of zerodha, call them to know further details. Many assets like mutual funds etc can be provided as collateral.

Does Zerodha accept BG as collaterals

Collateral margins are used to buy stocks in a way that your risks are managed and only less amount of your money is used.

Bank guarantees cannot be pledged at Zerodha. You can, however, pledge your shares/ETFs which are listed here for collateral margins.

1 Like

Thanks, is there any broker in India who accept BGs as collateral. I am not able to find one, to me they are the most optimal way of securing margins