Reliance Money : What is the catch?

Money has been the probably most despised and yet most desired thing during all the ages everywhere. In India the name of Reliance is capable to invoke the set of such emotions. Among investors and traders ‘Reliance’ is equivalent to growth. Therefore, the combination of Reliance and Money has to be delighting or devastating , depending upon which side of the table you are sitting.

Recently I have begun to take interest in Future and Options but after some informations and calculations I found that I would be paying handsome commission to my broker irrespective of my returns.

Then someone suggested me to do online trading through Reliance Money and told about the brokerage and other charges charged by Reliance Money. It was hard to believe when I looked at the brokerage percentages they charge.

Reliance Money charges prepaid, fixed Rs. 500-00 for the turnover of Rs.10 millions (1 crore) in which it allows turnover of trade Future/Options upto 9 million and delivery upto Rs.1 million. Therefore brokerage charges are as low as Rs.0.05 for Rs.10,000-00.

Most brokers charge for delivery is anywhere between 0.25 % to 0.75 % , so brokerage for the delivery of stocks worth Rs. 10,00,000-00 would be between Rs. 2500-00 to 7500-00. In Future trading, brokerage is between 0.02% to 0.05% and turnover of Rs. 90,00,000-00 would cost between Rs.18000-00 to Rs.45,000-00. Further , one has to pay 12% Service Tax on the brokerage amount.

So, Brokerage charges for a 90m(FnO)+ 10m(delivery) would between Rs.20,000-00 to 52,000-00 and with additional 12% service tax on the amount. Whereas Reliance money offer all these for Rs. 500-00. Cleverly,RM shows commission of 1 paisa for every trade , irrespective of the amount of a trade, so no service tax is to be borne. For the active traders , for Rs.2,500-00 turnover is allowed upto the extent of Rs. 60 million

While registration one has to pay Rs.750-00 as one time fees and that includes the opening of of demat account with Reliance Money, which can be maintained annually for Rs.50-00.Reliance Money also offers IPO, Mutual Fund, Commodities, Forex etc., once you open the account.

Mainly due to the lucrative hyper-low brokerage charges, Reliance Money has attracted lots of interest and making difficult for other brokerage house to stay in the game. It is wondering how Reliance Money is able to sustain in the market with such puny commissions. However, one thing is notably different from other brokerage house, that Reliance Money requires cash to be deposited for margin money, while most others accept stock in the place of cash margin. Probably by using the cash money deposited by the account holders RM is able to stay afloat.

In my case I will be depositing Rs.10,000-00 as the margin money as at this time I am not venturing into Future/options trading, partly because I am not prepared for the trade, and partly I have never traded online. So initially I will be experimenting with the online trading doing intra day trading as I will not be able to take delivery more than the amount I have deposited.

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