From the example you have mentioned above, let's say you have ₹8 Lakh as collateral margin (post haircut). In order to use that entire 8 Lakhs collateral, you must maintain ₹8 Lakh in Cash. However, let's say you add only 2 Lakh. Then you will be able to trade with a margin of up to 4 Lakh (2 Lakh cash+ 2 Lakh collateral). The rest of the amount cannot be utilized.
This policy has been implemented to avoid penalties and interest charges arising from debit balance (Negative).
For more details, refer to this notice.