As India’s stock market changes, more and more investors are using modern instruments like Margin Trading Facility (MTF) to get the most out of their money. Over 21 crore Demat accounts are active across the country as of January 2026. The use of MTF in this way has been a popular way to make the most of investments. But one important concern comes up: Do you need a Demat account to trade MTF? Yes, it’s a must under SEBI rules.
The Margin Trading Facility (MTF) is a way for brokers to lend money to investors so they can buy securities by paying only a small part of the total value up front—usually between 20% and 50%—while the broker pays the balance at a low interest rate. For example, Kotak Securities lets you borrow up to five times the value of more than 1500 equities and pay as little as 9.69% interest each year. This facility is great for delivery trades since it lets holders keep their positions open forever without having to square off, as long as they meet their margins. But it makes both profits and losses bigger, therefore it’s best for traders who know how to deal with market volatility.
What is a Demat Account?
A Demat account is an electronic storage space for your mutual funds, bonds, stocks, and other items in digital form. SEBI started it in 1996. It gets rid of physical certificates, which lowers the danger of theft or loss. It works with trading accounts to make transactions easy. It is illegal to own or transfer stocks electronically in India without a Demat account. This has been the case since 1999.
Why is a Demat Account needed for MTF trading?
In short, MTF is the practice of buying and keeping securities on margin, and all of these assets must be held in a digital format. SEBI says that equities bought through MTF must be pledged as collateral in your Demat account. This way, the broker can get their money back if the margins aren’t enough. You can’t credit buy shares or pledge current holdings for cashless finance without it. To use MTF, brokers need an active Demat and trading account. They also often need a Power of Attorney (POA) or Demat Debit and Pledge Instruction (DDPI) to make things run more smoothly.
Benefits of Demat Account
There are a lot of good things that come from this connection. A Demat account lets you pledge existing shares, which increases liquidity without requiring cash up front. It also makes it easier for companies to do things like pay dividends, which go directly to the account.
In short, a Demat account is necessary for MTF trading because it is the basic tool that makes sure you follow the rules and keep your assets safe. You may use MTF successfully and with less risk if you choose a trustworthy source. Start your trip today and make better trades.
