Margin trading refers to the practice of using borrowed funds from a broker to trade a financial asset, which becomes the collateral for the loan from the broker. Traders are allowed to buy stocks by paying a marginal amount of the actual value.
Margin trading can be considered as leveraging positions by traders in the market either with cash or security. The margin can be settled later when traders square off positions.
In order to avail the margin trading facility (MTF), traders need to have a margin account with the broker. The margin varies across brokerages. Traders need to pay a certain sum (minimum) at the time of opening the MTF account. At the same time, they are required to maintain a minimum balance at all times. An interest rate is charged by the broker on the amount funded. In case he fails to maintain the minimum balance, his trade gets squared off.
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In a small relief to the common man in a covid-struck difficult year, the penalty for non-maintenance of the minimum balance in a post office savings account has been reduced by half. As per a notification issued by the Ministry of Finance, the fee levied for non-maintenance of minimum balance in the post office savings account has been reduced to Rs50 (inclusive of GST) from Rs100 at present. This was done as part of the amendments to the Post Office Savings Account Scheme 2019 rules.
According to the post office savings account rules, currently an account holder is required to maintain a minimum balance of Rs500. If the minimum balance of the post office savings account falls below Rs500 and the difference is not deposited into the account before the end of the financial year, then an account maintenance fee is levied.