I have pledged my shares and received collateral margin, however, the funds statement shows a debit balance. Does this debit balance attract any delayed charges?
Your funds statement won’t comprise collateral margins as the collateral margin provided is neither added or removed from the balance in your trading account.
Since the collateral margin isn’t reflected in the funds statement, there will be scenarios in which your ledger will show the debit balance when you have used the collateral margin for taking a position.
Take this example.
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Position – Long Nifty Futures
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Margin required – Rs. 1,00,000
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Opening Balance on Kotak Neo – Rs. 50,000
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Collateral (liquid funds) – Rs. 30,000 (cash equivalent)
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Collateral (equities) – Rs. 40,000
According to the regulations, 50% of the margins blocked for overnight derivative positions have to come in the form of cash or cash equivalent. The remaining 50% of the margin requirement can come from non-cash equivalent collateral margins, i.e., margins raised from pledging liquid funds.
| Component | Available for use | Used | Balance |
|---|---|---|---|
Opening Balance (Cash) | 50,000 | 30,000 | 20,000 |
Cash Equivalent | 30,000 | 30,000 | 0 |
Collateral Margin | 40,000 | 40,000 | 0 |
Total Margin Collected | 1,00,000 |
The withdrawable balance is = Opening Balance – Utilized Amount
= 50,000 – 30,000 = Rs. 20,000/-
Since the collateral margin is not reflected in the funds, the funds statement will show:
Margin required for the position – Cash Available (Opening Balance)
= 1,00,000 – 50,000
= (50,000)
Note: Delayed payment charges won’t be levied on this debit balance of Rs. 50,000.