Short-term funding via NRML in equity segment

NRML stands for normal order type and short-term funding through NRML is offered by Flattrade in equity segment. We are going to discuss about NRML in equity segment in this article.

The benefits of using NRML order type is that you have more buying power, improved returns on your investments and flexible payment option.

You can buy shares by selecting NRML and you will have to make a partial payment instead of the full amount for purchasing a share. It will be easier to understand if this process is explained with an example.

Assume a company’s shares are trading at Rs 1000, but you are having only Rs 500 in his or her trading account. You can still buy the share by opting NRML where the remaining Rs 500 portion will be funded by Flattrade. When NRML is selected, you have the leverage to buy your desired share using his Rs 500 and the remaining amount of Rs 500 funded by Flattrade. For this Rs 500 funded by Flattrade, an interest rate of 11.99% is levied. But there is also another condition with respect to holding the security.

You can hold the stock for only five days after the pay-out day. Pay-out day is T+2. Here, ‘T’ is the transaction day or the day on which you buy a share. You must sell the security and square off the position within that five days, otherwise Flattrade will square off your position on the fifth day. So, you can hold the share for a maximum of T+2+5 days.

The equities that are bought by you are visible in the trading system but it is not reflected in the demat account. The equities are held in Client Unpaid Securities Account, also known as CUSA. Once the fund obligations are satisfied, the securities will be transferred to your demat account. You can also sell the shares and close your position to fulfil your obligation. If the fund obligations are not met by you, the position will be squared off and all dues will be recovered. 

To hold equities for a longer time by availing margin, clients of Flattrade can subscribe to MTF (Margin Trading Facility) order type. You can use the MTF route for long-term funding and can either use the cash as margin or pledge the approved shares and securities already available to buy new shares.  To read more about MTF, click here