What is Badla Financing?

"Badla" in share trading means something in return. It is a system to carry-forward. Badla is the charge, which the investor pays to carry forward his position. Using the "Badla" tool or system, an investor can take a position in a scrip without actually taking delivery of the stock. He can carry-forward his position on the payment of small margin.

In the case of short-selling the charge is termed as 'undha badla'.

The "Badla" System or the Carry Forward (CF) System Serves 3 Needs in Share Trading:

  1. Quasi-hedging: If an investor feels that the price of a particular share is expected to go up or come down, he or she can trade in the share without giving or taking delivery of the stock and take advantage of the volatility of the stock.
  2. Stock lending: If the investor wants to short sell without owning the underlying security, he can easily borrow the shares for the broker or stock lender in return of some charge.
  3. Financing mechanism: If the investor wants to buy shares without paying the full consideration, he can borrow money from a financier. A financier can lend money to the investor to buy shares. This system is called "Vyaj Badla" or "Badla Financing".
Badla Financing

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