What is the difference between margin shortfall and debit balance?

There is a margin penalty levied by exchange as explained by Zerodha here
Also, there is a interest charged by Zerodha as explained here

Are these both same? are both charges applicable if there is a margin shortfall?
Could you explain the differences with examples?

Suppose, I have 1lac cash in my account and took a future buy position for which margin requirement is 1lac.
By end of the day, MTM resulted in say 2000 loss, but my position is not closed yet.
Will this be considered as both margin shortfall and debit balance?

same as above except the 1lac margin in my account is from liquidbees collateral and there is no cash

Any of above charges/fines, will they be visible in my daily ledger within same day/next day or do I have to wait till end of month?



@Nakul can you.

Nope. Margin shortfall and debit balance are not the same.

Margin shortfall is when you don’t have enough margin in your trading account to cover for any increase in SPAN+Exposure margin when exchange updates their margin sheet. This generally happens when your MTM loss+cash in trading account does not cover SPAN margin. Margin shortfall usually doesn’t happen during market hours, since broker does not allow you take positions without sufficient margin. This happens either when your MTM loss increases heavily or when exchange updates margin after market hours due to increased volatility (volatility is an input parameter to SPAN model).

Debit balance is when you have sufficient enough margin to hold all your overnight positions, but the margin you have is not in exchange stipulated margin form. exchange wants all traders to maintain atleast 50% of margin in cash equivalent form. in case you have total collateral margin > margin requirement, but do not have 50% of margin requirement in cash equivalent (either cash in trading account or liquidbees), margin call is not issued. But deficit cash balance is charged at 18% annualized interest.

case 1 : this is not debit balance. but if margin file is updated after you entered your position and SPAN margin is increased and increase in SPAN > 2000 MTM loss, then margin call is issued and you need to fund your trading account with shortfall (SPAN increase-[MTM loss]). If SPAN increased is less than MTM loss, no margin call and no need to fund you a/c.

case 2: liquid bees collateral is no different from cash in trading account. so no debit balance. in case you have pledged 1 lac worth equity for collateral and since, 50% isn’t in form of liquidbees or cash in trading account, you will be charged interest on 50% of collateral margin.

However, it is always better to maintain cash in trading account to atleast cover your MTM swings, to avoid your broker from liquidating your pledged equity or liquidbees, in case SPAN margin is increased.

But there may be a case when both margin call and debit balance may get issued.
need @nithin @siva @VenuMadhav to clarify on that special case.


Thanks Varun.

could you let me know why did you calculate SPAN increase - MTM loss in above example?
Shouldn’t it be SPAN increase + MTM loss?

case 3: say I’ve utilized all margin available and by next day volatility increased and so SPAN is creased by say small amount of 5000 for all my positions together but there is no MTM loss/profit. Now Zerodha issued a call and say I haven’t added funds.
will there be fine from exchange always for small amounts also? Is it on discretionary basis? If yes, is it based on discretion of exchange or Zerodha? Also will there be interest charged by Zerodha along with fine from exchange?

case 4: same scenario as above except margin remained same but there is MTM loss. will there be margin call? what are the other charges/fines?


I considered MTM loss to be a negative value.
So shortfall = SPAN increase - (-ve MTM) = SPAN increase + MTM loss

case 3: if SPAN margin is increased by 5000 and there is no MTM loss/profit, then they will give you sufficient time till EOD to add funds. but if RMS team thinks your positions are at high risk and if they expect high volatility ahead, broker may square off all your positions at their own discretion, if you do not add funds after margin call. exchange has nothing to do with this, since it is the responsibility of broker to collect margin while entering positions and margin files are updated by broker to exchange only at EOD.

if at EOD you have margin shortfall, exchange will block margins from brokers working capital and broker will charge interest on their money that is blocked by exchange on behalf of your positions.

case 4: depends on magnitude of MTM loss. if SPAN margin collected while entering is enough to cover your MTM loss, there won’t be margin call. if your MTM loss crosses that threshold, broker will ask you add funds to avoid square off.

Hi Varun,

Thanks again. It made lot of sense to me.

case 5: I’ve more than sufficient margin in my account and all of it came from liquidbees collateral and there is no cash in my account. If there is MTM loss, will it be considered as debit balance as there is no cash in my account? or is the MTM loss considered from liquidbees margin? (i.e., will the debit balance come into picture only when the position is closed with a loss?)

In any case, if there is a margin shortfall, I’m okay with utilizing brokers fund for few days and pay 0.05% interest per day to broker, but I want to avoid 0.5% to 5% range fine from exchange.
Could you let me know at what point exchange puts a fine? (even though brokers working capital is blocked?)


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No worries if you have enough margin in liquidbees collateral form. they would simply debit any increased margin from available collateral margin. while closing a position with loss, if you don’t have enough cash in trading account, broker will liquidate your pledged liquidbees to adjust loss. so it is always advised to maintain cash to atleast cover your MTM swings.

0.5% penalty is fined by exchange after three days of debit balance in your books.

no broker, atleast discount broker will let you hold your positions for three days without adding funds to cover shortfall. they will simply square off your positions at their own discretion. they will not consult you before closing your positions. they will send email and SMS for margin call. if you don’t fund, RMS team will square off your risky positions.

broker will not let you reach the point where exchange slaps penalty.

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Thanks a lot Varun for clarifying all my questions.



Available free cash fund : Rs. 10,15,223 : 80/=

I took the following NRML positions write shortsell stock options



Will I have to bear any margin shortfall penalty / interest etc ?

How much ?

Would suggest you check the margin requirement for your positions using Basket Orders, to determine whether you’ve sufficient margins or not.

I m confused . Sometimes it says 6000 shortfall . Sometimes it says 500 excess .
Can u pls help me find the correct figure?

Can you create ticket for account specific.


i know if there is overnight (just 1 night only) shortfall in margin (span+exposure) then also the exchange charges the penalty on that shortfall .BUT , do the broker also charge the interest on that penalty amount ? because , if the trader is paying the penalty to the exchange then why would pay interest to the broker ?

As far as I know, you will be charged both - the penalty for margin shortfall by the exchange as well as interest for the negative balance by the broker. This thread discussed the reasoning behind this -


if the client has already charged the exchange shortfall penalty ; is it true that interest also would be charged by the broker even though there is no exposure leverage provided by the broker ?
e.g. :
at 10am : margin required (span+exposure) and the margin available while taking the position is Rs.5 lakhs .
now , after the position taken and the market close after 3.30pm ; the margin required shows Rs.5,04,000/=

now , next day , in the morning i square off exit the position . BUT , the broker charges penalty of Rs.23.60/= {@0.50% + GST} on that Rs.4000/= shortfall AND the broker also charges interest Rs. 2.36/= {@18% P.A. + GST}

is this legal and authorized ?

Penalty is charged by exchange and not by broker, it is collected by broker and passed to exchange.

Irrespective of client having margin or not broker has to fulfill complete margin from his pocket if required and for that reason interest is charged by us for the shortfall.

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