Buy Stocks Now and Pay Later Through Normal Orders

When you place an order to buy stocks, you need to have adequate funds at your disposal. Lack of funds can be a roadblock in order placement, and in the worst-case scenario, you may have to let go of the order.

Kotak Securities brings to you a smart way of stock market investing - Normal Orders, or NRML orders. So, what is it and the benefits? Let’s find out.

What is Normal Orders (NRML)?

It is a facility where you can buy stocks without having to pay the amount upfront, ie on T day, or the trade placement day. You can pay the remaining balance in T+1* days. Let’s understand it with a numerical example. For instance, you want to buy 100 stocks of a company at Rs. 1500 each under simple cash trade.

Under normal circumstances, you need to pay Rs. 1.5 lakhs upfront to execute the order. At this point of time, let’s say you have Rs. 50,000 in cash in your account and Rs. 1,00,000 in collateral received on pledging shares or securities in your portfolio.

Under Normal Orders (NRML), you can pay for the trade with the collateral received on pledging of securities at the time of order placement. This means that both your cash and collateral received on pledging securities can be used to place the order on T day. You get T+1 days to arrange and pay the remaining amount in cash, which in this case is Rs. 1,00,000.

Benefits of NRML - No Need to Pay the Full Amount Upfront

This is a significant benefit under Normal Orders (NRML). You can execute the order even if you don’t have the full amount in cash required at your disposal at that time. There can be occasions when you may run short of cash. However, Normal Orders give you the necessary time to arrange for the shortfall and pay for the order with stock collateral – Thus, giving you time to pay the amount in cash on T+1 day.

What if you are unable to pay the remaining amount within one trading day?

• In case of using NRML as your product type while placing an order, if the amount is not paid before the settlement due date, i.e. one trading day (T+1) after the trade date, you will incur interest on the outstanding amount. At this point of time, we check if you have sufficient margin to cover the stock or not. If the margin is present, we mark the stock as beneficiary. However, if sufficient margin is not present, the stock is marked as pledged under Client Unpaid Securities Pledgee Account (CUSPA)

• For example: If you buy a share on Monday (T-day), you need to pay in the amount by end of market hours on T+1 day. If the balance due is not received by then you will incur interest charges for the T+1 day, that is Tuesday. If you do not have sufficient margin present to cover your position, your stock is marked under CUSPA

• *T+1 days: The day on which the stock is purchased is referred to as ‘T’ day. T+1 settlement means 1 working days after T day. Which means, if a stock is bought on Thursday, the payment has to be made by Friday. Similarly, if the stock is bought on Friday, the payment has to be made by Monday.