Shares Collateral
1010 shares will not be accepted as collateral from August 1. This change has come after the National Stock Exchange (NSE) revised the criteria for securities eligible as collateral.
The major stocks that will not be accepted as collateral include Adani Power, Yes Bank, Suzlon Energy, HUDCO, Bharat Dynamics, Bharti Hexacom, IRB Infrastructure, NBCC, Go Digit, Tata Investment, Paytm and Inox Wind.
Which stocks will be accepted as collateral
NSE said that from August 1, it will accept as collateral only those securities which have been traded on at least 99 percent of the days in the last 6 months and which have an impact cost of up to 0.1 percent for an order value of Rs 1 lakh.
For more information, you first have to understand the Margin Trading Facility (MTF). Know more about it further.
What is MTF
MTF is like ‘Buy Now Pay Later’. Under this, you can buy more shares by paying only a part of their total price. The rest of the money is given by the broker and interest is charged on it.
Suppose an investor wants to buy 500 shares of a company at the rate of Rs 200, then the required investment amount will be Rs 1 lakh. Under MTF, the investor will pay only 30 percent of the amount, while the rest of the money (70 percent) will be given by the broker and that too at an interest rate.
Now understand the meaning of collateral
MTF allows investors to buy more stocks than they can afford by borrowing money from their broker. These borrowed funds are available against the stocks or other securities held in the investor’s account. It is a kind of security deposit, which assures the broker that they have some security over the borrowed funds.
So, these pledged securities are ‘collateral’. The same collateral will not include 1010 shares. Jupiter Wagons, KIOCL, Jyoti CNC Automation, JBM Auto, Hatsun Agro Products, Tejas Networks, Swan Energy are other stocks that are no longer eligible for collateral.