When a broker takes your stocks as collateral and gives you a loan against those stocks, they also need to have a safety net in case the stock prices go down - this safety net is called a haircut.

So, a haircut is a percentage difference between the market value of the stocks you've pledged and the value that your broker considers as collateral. So the portion of value that your broker holds for safety is called the “haircut”.

Here's an example: If you have a ₹1,000 stock with a 15% haircut, you won't get the full ₹1,000 as your margin benefit. Instead, you'll get ₹850 to use, and the broker sets aside ₹150 for safety. That ₹150 is your haircut.