In the fast-paced world of stock trading and futures and options (F&O) investments, staying on top of financial obligations is crucial. As a stock or F&O trader, it is essential to be aware of the various charges associated with your trading activities. One such important aspect is understanding and managing delayed payment charges.

We will delve into two specific cases that trigger delayed payment charges.

Case #1: If You Have a Negative Balance in Your Trading Account

Suppose you have purchased a few shares today. After adding brokerage charges, it was found that the final value is more than the available balance in your trading account. This means you will have a debit balance in your account. When such a scenario arises, you must pay a delayed payment charge or DPC.

A debit balance may consist of one or all of the following:

• Delayed Payment Charges of the overdue amount
• Overdue annual maintenance charges (AMC)
• All the transactions that use collateral limits
• Costs (if any) on bouncing cheques
• Any interest levied on any one or all of the debit balance items listed above

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The Delayed Payment Charge (DPC) for Motilal Oswal is 0.06% per day. So, you will be charged an interest rate of 21.90% per annum on your debit balance. Although the DPC is calculated daily, it is reflected on your ledger weekly.

Example:

• Let’s say you bought ten shares of ITC on Monday. This means Monday is your day of transaction or T-day.
• If you make the payment on Tuesday (T+1 day), you don’t have to pay any delayed payment charges.
• If you miss a payment on T+1 day, you'll have to pay at the rate of 0.06% per day on the debit balance. You must keep paying DPC on the debit balance from T+2-day until you make the payment.
• It may also happen that instead of holding 10 ITC shares with a debit balance on Monday (T-day), you:
• Don’t pay the debit balance on Tuesday (T+1-day)
• Sell all the shares on Tuesday (T+1-day).
• In such a scenario, you'll have to pay only delayed payment charges for one day. DPC will be levied for Tuesday or T+2-day only.

Case #2: If You Over-Utilise Your Non-Cash Collateral Margin

In India, the stock exchange mandates every trader in the futures-and-options (F&O) segment to maintain a margin of:

• Fifty per cent in cash or the equivalent of cash
• Other fifty per cent in non-cash collateral

If you don't maintain an adequate cash margin, you must use non-cash collateral to fulfil the shortfall in cash/cash equivalent.

In case you pledge non-cash collateral such as shares or mutual fund units to compensate for the shortfall in money/cash-equivalent, you'll have to pay:

• Haircut on pledged shares
• A delayed payment charge of 0.06% per day or 21.90% per annum on your shortfall amount in the required cash margin.

How Can One Avoid Delayed Payment Charges?

To avoid paying DPC, you should add an adequate amount of funds to your trading account.

If there is not enough fund available in your trading account, you can:

• Transfer at least the shortfall amount or more than that to your trading account.
• Pay a minimum amount equivalent to the shortfall or more through a cheque.

If you don't transfer funds or pay the shortfall, the required debit balance, along with DPC and other charges (if any), will be adjusted against the funds that were credited to your trading account after the sale of your shares.

Final Words

Stock exchanges charge daily delayed payment charges through stockbrokers, while the total DPC and associated fees are collected monthly and specified in your fund statement. These charges are incurred daily on fund shortfalls from T+2 onwards until payment is made, with the requirement to settle the total DPC charges by the end of each month.