Why does zerodha asks for funds before we buy share to transfer into their account unlike motilal oswal or ICICI where we get 3 to 5 days credit period or time till stocks are transferred in our DMAT.
As even if I am 200 rs short on balance it doesn’t take order
Could you please elaborate your query? No broker will allow you to buy shares if you don’t have the required amount of cash in your A/c.
It is for the safer side of zerodha that it asks for funds beforehand. I agree that other brokerage firms gives you credit period but it can be problematic since many might use the credit and it can happen that they wont be able to honour it within time and they default. Rather than all those issues, they ask for funds beforehand so that it eliminates bad debts kind of thing
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Discount broking?
But then thing is even our money is at risk as we transfer to their account. Zerodha has our shares against credit period they provide. Like mosl does even they can take our shares back if someone fails to pay within stipulated period
I don’t think so… it’s only related to lower rates of brokerage
For eg in case of MOSL if I buy shares today I can pay them within 5 days now this limit differs depending upon your holding with them but minimum is 3 days. I buy shares today and I can transfer money or give cheque of that amount within 3 days.
But here i have to deposit money well in advance in Zerodha’s account. If I don’t use that money or buy shares it’s lying in their account. They are taking interest on our money
My worry is in worst case what if one fine day they just disappear taking our money?
Please understand “there is nothing called as free lunch”, the brokers who provide credit either charge interest OR they charge higher brokerage to recover the interest for that period OR they recover it using some other mechanism which we don’t know. Zeroda kind of brokers who don’t charge brokerage can’t offer such service, they cannot survive.
To be on the safe side don’t leave any cash with any broker and you will not get any interest for that.
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Agreed that zerodha has shares but if you default in paying then zerodha will have to apply long route in recovering money from you. And since zerodha is a reputed company and company providing quick withdrawal of funds, it is very unlikely that it will utilise your deposited money or it will use money without your knowledge
Hi Manjiri,
When you buy shares on delivery there is some one at the other end who is selling these shares, now the exchange requirement is that the shares and the funds be settled on T+2 day, buy the funds have to be collected upfront. Now ICICI being a bank cum broker they have an option to fund you to buy this and Motilal Oswal does the same. This means they are basically giving you a loan to buy the shares. Zerodha hasn’t started doing this yet as they has a requirement of an NBFC licence since we aren’t a bank. Now the advantage for big brokers like them is, they use this as bait to get more people to trade through them, but you do have to pay a higher brokerage and hence they are getting income out of this. No gimmicks from Zerodha like this.
You gotta keep the money in your trading account even before you place the trade. The risk of Zerodha running away with your money is as much as your bank running away with your money. The banks are regulated by RBI. Zerodha on the other hand is regulated by SEBI and there are periodic audits done by the exchanges too to ensure there is no misuse of funds.
Cheers,
Lindo
For safeside, Zerodha awares traders about fund ! And Thats good for traders to avoid losses.
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there can not be free lunch ! if a broker is accepting your purchased share payment after 5 days means he is meeting the exchange T PLUS 2 pay out obligation from his own funds and surely charging you hefty interest for the same . t plus 2 means shares purchased must be paid on morning of third working day so as the seller get it by afternoon.
T plus 2 means payment can be made on the morning of third working day .brokers do allow regular clients to make payment as per this .