Zerodha Delayed Payment Charges explained
At Zerodha, the settlement requirements for transactions are noted in the client’s ledger on the date of settlement. Clients are asked to pay by the pay-in time on the settlement day. However, there are times when clients delay their payments beyond this time frame.
Despite these delays, Zerodha must follow legal regulations and meet its settlement commitments on time. Zerodha applies delayed payment charges on customer accounts to encourage regular payments and ensure funds are received on time. These fees serve as a warning to clients who fail to deposit the required funds by the designated pay-in time on settlement day.
Delayed payment charges are charged to the client’s ledger debit balance at a daily rate of 0.05%. This rate is determined using the overall debit balance in the client’s ledger, which is then aggregated across all segments of the relevant exchange.
The final debit balance calculation considers any margin releases. Zerodha’s charges are intended to reduce payment delays and ensure smooth settlement operations.
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Reasons for Delayed Payment
At Zerodha, these are the following reasons why delayed payment charges are applied:
- Debit Balance in Account:
A Debit balance occurs when your consumed money surpasses the available balance in your Zerodha account. Furthermore, if charges are deducted when there is insufficient balance, this results in a Debit balance. In such instances, the Debit balance is compounded at a rate of 0.05% each day or 18% annually.
- For Example-
Suppose. If the delayed payment of Rs. 100 is not paid within 60 days then the daily penalty rate is 0.05%, the penalty for each day will be Rs. 0.05. When this daily penalty is multiplied by the 60-day period of time, the total penalty is Rs. 3. After 60 days, Zerodha will take Rs. 3 as a penalty for the Delayed payment from your account.
- Example 2:
If your delayed amount with Zerodha is Rs. 10,000 and the balance remains not paid for 365 days, a daily penalty rate of 0.05% will be applied. This will result into a daily penalty of Rs. 5. Over a period of 365 days, the total penalty is Rs. 1,825 (Rs. 5 * 365). Consequently, after 365 days of the delayed period, Zerodha will deduct the penalty amount of Rs. 1,825 from your account.
- Overuse of Non-Cash Equivalent Collateral Margin:
Exchanges mandate that 50% of the margin for F&O positions be provided by cash or cash-equivalent collateral, with the remaining 50% being able to be provided by non-cash collateral. A specific document (DOC) contains a list of permissible margin pledge instruments as well as the haircut percentages relevant to them.
Understanding Margin Collateral
When trading Futures and Options (F&O) on platforms such as Zerodha, you must hold a set amount of money as a safety support, known as margin. Exchanges have rules governing how much of this margin must be cash and how much can be in other forms of assets. If you don’t have enough cash as margin and Zerodha gives you the amount you are missing which includes
Cash Collateral: This is the money in your trading account.
Non-Cash Collateral: These are assets, such as stocks or bonds, that you can use as collateral instead of cash.
Margin requirements at Zerodha are divided as 2 part where the exchanges say at least 50 % of your margin should be in cash. and the remaining 50% can be in non-cash assets. If the cash margin is insufficient and Zerodha fills the gap, a delayed payment tax of 0.035% per day or 12.775% per year is levied on the shortfall.
- For Example
If you have a balance due of ₹100 for 60 days, the daily charges will be 0.035% of ₹100, or ₹0.035. Over 60 days, this amounts to a total fee of ₹0.035 * 60, or ₹2.10. Zerodha will then deduct this ₹2.10 from the account after 60 days if the overdue amount hadn’t been paid before that.
- Example 2
If you have a balance due of ₹10,000 for 365 days, the daily charge will be 0.035% of ₹10,000, or ₹3.50. Over 365 days, the total charge is ₹1,277.50, calculated as ₹3.50 multiplied by 365. Zerodha will withdraw ₹1,277.50 from your account after 365 days if the overdue amount remains unpaid.
How to Avoid Delayed Payment Charges?
To prevent these charges, make sure you have enough funds in your Zerodha account. Delayed payment charges are calculated daily and applied to your funds statement at the end of each month. The interest rate levied on the Debit balance can be found on Console’s interest statement.
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Note-
Delayed payment charges do not apply when margins rise during the day owing to market volatility or occurrences. If margins rise as a result of a hedge break (for example, the expiry or departure of one leg of a hedged position), delayed payment charges will apply if there are insufficient funds in your account.
Double Brokerage Policy in Zerodha
The “double brokerage policy” is usually a provision utilized by brokerage firms to reduce the risk of non-payment when an account indicates a debit or negative balance. This policy states that the brokerage firm will charge double the regular brokerage charges for any transactions done when an account has a negative balance. This serves as a penalty for preventing traders from operating accounts with insufficient cash. In Zerodha, If your account balance is negative, you will be charged double brokerage for instance, 60 rupees instead of 30 rupees.
Conclusion
On the whole, Zerodha charges late payment fees to guarantee its customers make payments on time and maintain a seamless settlement system. These are charged in case of Debit accounts balance or excessive use of non-cash equivalent margins as collateral. These delayed payment charges are usually Charged by almost every broker like Upstox, Angel One, Motilal Oswal, SBI, ICICI and more.
The interest rate is 0.05% daily or 18% per annum for Debit balances, while it is 0.035% daily or 12.775% per annum for shortfalls in cash margin. You can avoid these fees by ensuring you have enough funds in your account. Delayed payment charges are computed every day and posted monthly subject to specific conditions based on market events and margin requirements.
