Zerodha liquid bees collateral margin pledge cash equivalent 50:50 rule liquid etf

Liquid BeES as collateral margin on Zerodha

From WebNotes, a public knowledge base. Last updated . Reading time ~12 min.

Overview

Liquid BeES is a liquid exchange-traded fund that Zerodha accepts as cash-equivalent collateral, which makes it a popular way to park surplus cash and still keep it working as margin. When you pledge Liquid BeES, Zerodha credits collateral margin against it, and because the ETF is cash-equivalent, that margin is usable in full and counts toward the 50% cash portion required for every overnight futures and options position.

That is the property that sets Liquid BeES and other liquid ETFs apart from ordinary shares as collateral. Pledge a stock and its margin can fund only half of an overnight requirement; pledge Liquid BeES and it can satisfy the cash leg outright, all while the parked money continues to earn. This article explains what Liquid BeES is, why it counts as cash-equivalent under the 50:50 cash-collateral rule , the haircut that applies, what happens to dividends while it is pledged, how to pledge it, what it costs, and why it cannot be sold instantly. For the surrounding process, see margin pledge mechanics on Zerodha and pledge and collateral margin on Zerodha .

What Liquid BeES is and why it is used as collateral

Liquid BeES is a liquid ETF, meaning an exchange-traded fund that invests in very short-dated money-market and overnight instruments so that its value stays broadly stable. You buy and hold it in your demat account like any other ETF, and you can learn how to acquire it in how to buy Liquid BeES on Zerodha . Because its price barely moves and it is easy to value and sell, it sits in the family of instruments Zerodha treats as cash-equivalent collateral, alongside liquid and overnight mutual funds, government securities, and Zerodha’s own LIQUIDCASE ETF.

The appeal for an F&O trader is straightforward. Cash left idle in the trading account earns nothing. The same cash held in Liquid BeES stays close to its value, earns a return, and can be pledged so that it also serves as margin. You get the margin without selling the holding and without giving up the return, which is why liquid ETFs are a standard tool for meeting the cash requirement on overnight positions. When you pledge, the collateral margin appears under the Funds tab, computed from the previous closing value less a haircut, and it shows as collateral liquid funds rather than collateral equity.

Collateral margin from Liquid BeES, like any collateral margin, can be used for equity intraday trades, for trading futures, and for writing or shorting options. It cannot be used to buy stocks or ETFs for delivery. Buying options with collateral is permitted but carries a financing cost, covered in buying options using collateral margin .

Why Liquid BeES is cash-equivalent

The value of the cash-equivalent label comes from the 50:50 rule. SEBI requires that at least half the margin for an overnight F&O position be met in cash or cash-equivalent collateral, with the balance met from non-cash collateral such as pledged stocks. So for a position needing Rs 1 lakh of margin, you must hold at least Rs 50,000 in cash or cash equivalents; pledged stock cannot fund the whole amount.

Collateral from cash-component instruments, which includes Liquid BeES, liquid funds, overnight funds and government securities, is usable in full and meets this cash leg. Collateral from non-cash instruments, meaning ordinary stocks, can meet only up to 50% of the requirement. The split between the two buckets is set out in cash component versus collateral component . In practice, a trader who pledges Rs 1 lakh of Liquid BeES has already covered the cash leg for a Rs 1 lakh overnight position, whereas a trader who pledges Rs 1 lakh of stock still needs a separate Rs 50,000 of cash or cash equivalents.

Getting this wrong has a cost. Using non-cash collateral beyond the 50% limit creates a cash shortfall, which attracts a delayed-payment charge of 0.035% per day, equal to 12.775% a year, plus 18% GST. From 1 April 2026, if the cash shortfall on an account exceeds Rs 5 lakh, the brokerage on F&O orders rises to Rs 40 per order from Rs 20 instead of that charge. Holding the cash leg in Liquid BeES sidesteps both while earning a return, which is the core reason to use it. The mechanics of how a shortfall arises are in how to use collateral margin for F&O .

How much margin will Liquid BeES give

To see the benefit concretely, take an overnight F&O position needing Rs 1,00,000 of margin. If you hold Rs 1,00,000 of ordinary stock and pledge it, the collateral is non-cash, so even after the haircut it can fund only up to 50% of the requirement, contributing at most Rs 50,000 and leaving you to find another Rs 50,000 in cash or cash equivalents. If instead you pledge Rs 1,00,000 of Liquid BeES, the collateral is cash-equivalent: after its small haircut, close to the full amount counts toward the requirement and, importantly, toward the cash leg. The same rupee value of Liquid BeES therefore carries far more of an overnight position than the same value of stock, and it earns a return in the meantime.

These figures are illustrative, since the actual haircut is set per instrument and revised over time, but the pattern holds in every case: a rupee of Liquid BeES collateral does more work for an overnight trade than a rupee of stock collateral, because it is not capped by the 50% limit. That is the whole reason a trader keeps the cash portion of a margin book in a liquid ETF rather than in shares.

The haircut on Liquid BeES

A haircut is a percentage deducted from a security’s value to arrive at its collateral margin. It is a risk buffer, not a fee, so no money leaves your account and your units keep their value. The concept is explained fully in the Zerodha pledge haircut explained .

Because Liquid BeES is stable and liquid, its haircut is small compared with an equity stock, but it is not nil. The exact figure is published, next to the collateral value, on Zerodha’s approved-securities list at zerodha.com/approved-securities. That list is set by the Clearing Corporation and revised over time, so it is the only reliable source for the current number. As an illustration of the arithmetic only, Zerodha’s worked example for Sovereign Gold Bonds uses a 10% haircut, so Rs 100 of SGBs pledged gives Rs 90 of collateral; a liquid ETF such as Liquid BeES typically sits at a lower haircut than that, but you should read the live figure rather than assume one. The Value at Risk framework that drives haircuts assigns the smallest buffers to the least volatile instruments, which is why liquid ETFs land at the low end.

Dividends and reinvestment while pledged

A frequent worry is whether pledging Liquid BeES forfeits the income the fund throws off. It does not. Under the pledge system in force since 1 August 2020, pledged units stay in your own demat account; only a pledge is marked in favour of Zerodha Broking Limited in the depository. Your ownership is unchanged, and pledging does not affect corporate-action eligibility.

That means any distribution Liquid BeES makes, and any reinvestment of returns into your holding, continues to accrue to you as the unit holder exactly as it would if the units were unpledged. Cash dividends on holdings are credited directly to your primary bank account rather than routed through Zerodha, and the pledge marking does not interrupt them. So the return you hold Liquid BeES for in the first place keeps coming while the units double as margin. The one thing pledging changes is not the income but your ability to sell in a hurry, which the next sections cover.

How to pledge Liquid BeES for margin

The pledge request is placed from Console, and the flow matches pledging holdings for margin . In outline:

  1. Open Console, go to the Portfolio and then Pledge section, and select your Liquid BeES units. A single pledge request can include up to 50 holdings; submit another once the first is processed.
  2. Enter the quantity and submit. Securities can be pledged between 8 AM and 5 PM on trading days, and only in whole units, since fractional units cannot be pledged.
  3. Authorise the pledge on the CDSL portal with your TPIN and the OTP sent to your registered phone and email, unless you have given a POA or DDPI. This depository consent is covered in how to authorise a pledge on CDSL . Pending requests cannot be cancelled, and units already in a pending, success or overdue status for the day cannot be re-pledged the same day.
  4. Once processed, the collateral margin appears under the Funds tab and can be checked through how to verify collateral details .

On timing, ETF collateral usually reflects within a few minutes; Zerodha cites a window of roughly 5 to 15 minutes depending on the instrument. Only settled units can be pledged, so units bought today become pledgeable from the next trading day once they have settled under the current settlement cycle. Pledge ahead of when you need the margin rather than at the moment you want to trade.

Charges

Pledging costs a flat Rs 30 plus 18% GST per request, per ISIN, regardless of quantity, which is about Rs 35.40 per ISIN. Pledging again on a separate day incurs the charge again, so it is cheaper to pledge in one request than in several. Unpledging is free. The full breakdown, including the point that there is no unpledge charge, is on the Zerodha pledge charges page . Against the return Liquid BeES earns while pledged and the delayed-payment charge it helps you avoid, the one-time pledge fee is usually negligible.

Selling: you must unpledge first

Here is the operational catch. Ordinary pledged stocks can be sold instantly with a normal CNC order and auto-unpledge on sale, but Liquid BeES cannot. Like liquid funds and government securities, it cannot be instant-sold while pledged. To sell it you first place an unpledge request in Console; the units then move to your free holdings the next day, after which you can sell them on the exchange.

The unpledge timeline is the standard one: a request placed before 3:30 PM makes the units available the following day, and a request after 3:30 PM makes them available the day after. There are no charges and no restrictions on unpledging, set out in how to unpledge holdings on Zerodha . Because unpledging removes that collateral, release only what you can spare while positions are running; otherwise the account can fall into a shortfall and positions may be squared off to bring it back into line. Note that Liquid BeES is also used in a related context for meeting physical-delivery obligations, discussed in Liquid BeES and physical delivery margin .

Liquid BeES, LIQUIDCASE and other cash equivalents

Liquid BeES is one of several cash-equivalent options, and they differ mainly in origin and convenience. Zerodha’s own LIQUIDCASE ETF, along with the Zerodha Fund House Nifty LargeMidcap 250 Index Fund, is on the approved list and can be pledged in the same way. Liquid and overnight mutual funds pledged through Zerodha Coin serve the same cash-leg purpose, though mutual-fund collateral can take until the next trading day to credit, whereas an ETF like Liquid BeES tends to credit faster. Government securities and Sovereign Gold Bonds also count as cash-equivalent once credited and listed. Whichever you choose, the common thread is that a small haircut buys you collateral that fully satisfies the cash requirement, which ordinary equity cannot.

For the wider question of what qualifies at all, see securities eligible for pledging on Zerodha , and for the Kite field that reports this collateral, collateral liquid funds on Kite . What you cannot substitute is a bank fixed deposit, as covered in can you pledge a bank FD for margin on Zerodha .

Frequently asked questions

Can I use Liquid BeES as collateral on Zerodha?
Yes. Liquid BeES is a liquid ETF on Zerodha’s approved-securities list and can be pledged for collateral margin. It is treated as cash-equivalent, so the margin it generates is usable in full and helps meet the 50% cash requirement for overnight F&O positions.
Does Liquid BeES count toward the 50% cash leg of the 50:50 rule?
Yes. Liquid BeES, liquid funds, overnight funds and government securities are cash-equivalent collateral, so their post-haircut value counts toward the minimum 50% cash or cash-equivalent portion needed for overnight F&O margin. Ordinary pledged stock does not.
What is the haircut on Liquid BeES?
Being a stable liquid instrument, Liquid BeES carries a small haircut, but there is still a haircut. The exact figure is published on Zerodha’s approved-securities list at zerodha.com/approved-securities, so read it there rather than assuming a fixed number.
Do I keep the dividends on Liquid BeES while it is pledged?
Yes. Under the post-August 2020 pledge system your units stay in your own demat account, so pledging does not affect corporate-action benefits. Any distribution the fund makes continues to accrue to you as the unit holder.
Can I sell pledged Liquid BeES like a stock?
No. Liquid BeES cannot be instant-sold while pledged. You have to place an unpledge request first, after which the units move to your free holdings the next day and can then be sold.
What does it cost to pledge Liquid BeES?
Pledging costs a flat Rs 30 plus 18% GST per ISIN per pledge request, regardless of quantity. Unpledging is free. Pledging again on a later day incurs the charge again.

See also

External references

References

  1. Zerodha Support, Liquid BeES collateral under the Funds tab and cash-equivalent treatment, support.zerodha.com (accessed 1 July 2026).
  2. Zerodha Support, margin on liquid funds and the 50:50 cash-collateral requirement, support.zerodha.com (accessed 1 July 2026).
  3. Zerodha Support, what pledging is, charges and how collateral margin is computed, support.zerodha.com (accessed 1 July 2026).
  4. Zerodha, approved securities and per-security haircut list, zerodha.com/approved-securities (accessed 1 July 2026).
  5. SEBI Circular SEBI/HO/MIRSD/DOP/CIR/P/2020/171, “Margin obligations to be met by way of pledge / re-pledge in the Depository System”, 9 September 2020.

Conflict-of-interest disclosure. This article is published by the WebNotes Editorial Team for informational purposes and is written independently. WebNotes operates a Zerodha account-opening referral programme, disclosed on the pages that carry the referral link; this page does not carry it and earns no referral commission from the mechanics described here.

Related articles

Reviewed and published by

WebNotes Editorial Team

The WebNotes Editorial Team covers Indian capital markets, payments infrastructure and retail investor procedures. Every article is fact-checked against primary sources, principally SEBI circulars and master directions, NPCI specifications and the official support documentation published by the intermediary in question. Drafts go through a second-pair-of-eyes review and a separate compliance read before publication, and revisions are tracked against the SEBI and NPCI rule changes referenced in the methodology section.

Last reviewed
Conflicts of interest
WebNotes is independent. No relationship with any broker, registrar or bank named in this article.