Zerodha Capital (NBFC)
Zerodha Capital Private Limited is a Non-Banking Financial Company (NBFC) registered with the Reserve Bank of India and a wholly owned subsidiary within the Zerodha group. Its principal business is the provision of margin trading facility (MTF) funding to eligible clients of Zerodha Broking Limited, enabling them to purchase listed securities on margin. The company is headquartered in Bengaluru, Karnataka.
As the group’s regulated lending arm, Zerodha Capital holds the NBFC registration necessary to lend funds to retail clients against securities collateral. Interest income from MTF lending, alongside brokerage revenue at the parent broker, constitutes one of the primary revenue streams of the Zerodha group. The company does not accept public deposits and does not conduct retail lending outside the securities financing context.
Regulatory framework
NBFCs engaged in securities financing are subject to the RBI’s Master Direction on Non-Banking Financial Company, Systemically Important Non-Deposit taking and Deposit taking Company (Reserve Bank) Directions and to relevant SEBI circulars governing the margin trading facility.
SEBI introduced the margin trading facility framework through its circulars on funding of client purchase of securities. Under this framework, a stockbroker may offer clients the ability to purchase securities by contributing only a portion of the purchase consideration, with the remaining amount funded by an NBFC (or, where permitted, by the broker’s own capital). The funded securities serve as collateral for the loan.
The RBI categorises NBFCs into multiple layers based on systemic importance. Zerodha Capital, as a non-deposit-taking NBFC without systemic significance designation, operates as a base-layer NBFC (NBFC-BL under the scale-based regulation framework introduced in 2021). It is subject to lighter prudential requirements than systemically important NBFCs but is still required to maintain prescribed capital adequacy ratios and file periodic returns with the RBI.
Margin trading facility operations
The margin trading facility (MTF) allows an eligible Zerodha Broking client to purchase approved securities by paying a margin of at least fifty per cent of the purchase value (the minimum margin may be higher for specific securities based on exchange-prescribed margins). Zerodha Capital funds the remaining amount. The funded securities are pledged to Zerodha Capital as collateral.
Interest is charged on the outstanding funded amount at a rate announced periodically, typically in the range of ten to fourteen per cent per annum as of 2025-26. The client may liquidate the position at any time and repay the funded amount, or may carry the MTF position until either the client’s margin falls below the minimum requirement (triggering a margin call) or the maximum allowed MTF tenure (as specified by SEBI).
The list of approved securities for MTF is determined by Zerodha Broking Limited in accordance with SEBI norms, which generally restrict MTF to Group 1 securities (large-cap stocks with adequate liquidity) and approved exchange-defined lists.
Risk management and margin calls
Zerodha Capital, in coordination with Zerodha Broking’s risk management system, monitors the collateral value of pledged securities on a real-time basis. If the market value of pledged securities falls such that the client’s margin ratio drops below the prescribed minimum, a margin call is issued. The client is given a window to either deposit additional cash or securities or to authorise partial liquidation of the pledged position.
Failure to meet a margin call within the prescribed timeline results in automatic liquidation of sufficient securities to restore the margin ratio. This process is automated through Zerodha Broking’s risk management engine and is disclosed to clients in the MTF terms and conditions.
Relationship with Zerodha Broking Limited
Zerodha Capital does not originate or service its own clients independently. All MTF clients are existing account holders of Zerodha Broking Limited. The operational integration is such that MTF positions appear within the Kite trading platform and Console back-office portal alongside standard equity holdings, with MTF-funded portions distinctly labelled.
Revenue from MTF interest accrues to Zerodha Capital, while brokerage revenue on the underlying trades accrues to Zerodha Broking. Intercompany arrangements govern the referral and servicing relationship between the two entities, in compliance with RBI and SEBI requirements on related-party transactions.
Financial profile
As a private unlisted NBFC, Zerodha Capital files annual financial statements with the Ministry of Corporate Affairs and periodic returns with the RBI. The company’s loan book size is driven by the MTF uptake among Zerodha Broking’s active client base. MTF-related interest income contributes a meaningful proportion of the Zerodha group’s total non-brokerage revenue, alongside depository participant charges and platform fees.
For an integrated analysis of Zerodha group revenues, see Zerodha revenue model and profitability.
See also
- Zerodha
- Zerodha Broking Limited
- Reserve Bank of India
- Securities and Exchange Board of India
- Zerodha revenue model and profitability
References
- Reserve Bank of India. “List of NBFCs registered with RBI.” RBI website. Accessed May 2026.
- Securities and Exchange Board of India. “Circular on Margin Trading Facility.” SEBI/HO/MRD/DP/CIR/P/2017/SEBI, 2017.
- Reserve Bank of India. “Master Direction, Non-Banking Financial Company, Scale-Based Regulation.” RBI/DoR/2021-22/83, 22 October 2021.
- Ministry of Corporate Affairs. Company master data, Zerodha Capital Private Limited. MCA21 portal.
- Zerodha Capital Private Limited. Annual Report (ROC filing), FY2023-24.
- Securities and Exchange Board of India. “Approved list of securities for MTF.” Exchange circulars, various dates.