Loan Against Securities - A Complete Guide

In this episode of Dhan ki Baat, Nishant Jasapara, Chartered Accountant and a Company Secretary, explains about Loan Against Securities.

All you need to know about Loan Against Securities

Ever needed quick funds to take care of an urgent business or personal financial crunch? Loan against securities is a new and innovative method to assist you in fulfilling such a requirement.By way of loan against securities, you can borrow capital by pledging your financial investments. While conventional borrowing is related to securities such as gold, property or vehicle, or insurance policies, it is also possible to use your shares and mutual fund investments to obtain a loan.

Taking a loan against your securities provides instant liquidity against your shares, mutual funds debentures or any other investments without actually selling them off.

From where could you take a loan against your securities?

Both banks and NBFCs disburse loans against securities. To ease your decision-making process,here is a comparison that can help you to determine your preferred creditor.

Area Bank NBFC
Margin Requirement 50% against equity/equity oriented mutual funds & lender’s discretion on debt/ debt based mutual funds 50% against equity/equity oriented mutual funds & lender’s discretion on debt/ debt based mutual funds
Maximum Cap on Loan Amount Ten lakh against physical shares 20 lakh against demat shares No cap on the amount of loan
Loan Processing Slow and Time-Consuming Easy and Fast

Taking a loan from a Non-Banking Financial Company is the safest, fastest and most effective way to find funding for your cause. Without having any cap on the loan amount, you can take a loan of any amount depending on your investments.

Who can avail the facility of taking a loan against securities?

You are eligible to take a loan against your securities if you are :

An Individual: Any individual who is an Indian citizen above the age of 18 years and holds securities in the Indian financial markets, can apply for a loan against the securities.

Proprietorship or LLP: If you own a business or have a limited liability partnership, you can apply for a loan against your investments which you should have in the Indian share market.

Private/Public Limited Company: A private or a public limited company as a separate entity having investments with securities held under its name.

Private trust: A Private Trust governed under the Indian Trusts Act, 1882 which manages assigned property for religious or private purpose and holding securities in the financial market can also apply for a loan against the securities.

Purposes of taking a loan against securities?

An Individual, Proprietor/LLP, Private or Public Limited Company and a Private Trust can attain a loan against their securities for the following purposes:

Working capital requirement for business: Loan against securities can be taken to fund the day to day working capital requirement of the business to lead it towards a path of profit and future growth.

Business expansion: You can take a loan against your securities to expand your business. The loan amount can help you to create a new product or open new branches or offices in different cities.

Investment in capital market: If you want to increase your wealth and you are confident about your stock picks, you can take a loan on your present investments to raise money for further investment in the capital market. It can help you to build your wealth over time, and you can repay the loan by the profits you make from your future investments.

Any other personal use: Loan against securities can be taken for expenses like child’s marriage, education, buying a home or for any medical emergency.

What are the products and terms of lending offered?

You can choose a product between:

1. Fixed terms loans against shares, mutual funds, bonds:You can take a fixed term loan against your shares, mutual funds or bonds. Tenure of these loans is 6 to 12 months and the rate of interest varies from 11% onwards.

2. Overdraft facility: You can also choose the overdraft facility, which has a tenure of 12 to 24 months and rate of interest from 11% onwards.

Parameters for Credit Underwriting

The credit provider company reviews your loan application for creditworthiness before providing you with the loan. There are some common parameters

1. Security analysis:Analysis of your tradable financial securities (which you wish to present as collateral). The proper value of all the securities is determined, keeping in mind the various market fluctuations and so on that can affect the value of your securities.

2. Client profile, security provider and vintage: Your financial status will be evaluated. The lender shall check for market reputation and credibility based on the number of years for which you have been in business for (if the loan is taken for business purposes) called ‘vintage’.

3. Financial statements: You will have to submit the financial statements such as balance sheet, cash flow statements, income statements etc of your business.

4. Repayment and credit bureau history: Your repayment and credit bureau history gives a review of your past financial performance in repaying loans (if any) and the frequency of repayment.

How to determine which security to pledge?

Loan against securities is all about investments that are good enough to be held as collateral. The features of a good security are:

Easily marketable:The liquidity of the security is directly proportional to its acceptibility.

Stable and steady valuation: Should be stable enough not to fall during the slighest fluctuation. General high volatality makes investments riskier, discouraging lenders to accept them.

Ease of transfer: Should be easy to transfer without a complicated process.

Free from disabilities: The security should be free from any disability, which can complicate the process of providing loan for the credit company. This particularly concerns physical documents, certificates and bonds.

Dematerialized form: Dematerialized securities usually are easier to store, transfer or liquidate.

Documentation required to attain this loan from IIFL

The process is pretty straightforward and doesn’t require complicated documents:

KYC (Know your customer) documents like address proof, identity proof, etc. as per RBI guidelines.

Bank statements for the last three months.

Latest Audited Financial statements like balance sheets, income statements, etc.and ITR/Networth certificate.

Pledged security details/PMR reports

Standard loan agreements as per IIFL (if the loan is taken from IIFL).

Additional documents as required on case to case basis (documents depending on different or unique situations).

Process of taking a loan against securities

The process of attaining loan against securities from IIFL is given below:

Step 1: Call your Relationship Manager for common details like eligibility and the process of attaining a loan against your securities.

Step 2: Submit details on your loan requirements and information on the financial security.

Step 3: We shall inform you of the estimated value of loan in less than 2 hours.

Step 4: Initiate pledge of securities with IIFL.

Step 5: Submit loan documents with IIFL.

Step 6: Final loan approval (takes less than 24 hours).

Step 7: Document Audit and Pledge acceptance by IIFL

Step 8: Instant loan disbursal through RTGS or NEFT in your bank account.

Step 9: You receive the loan account in your bank account in less than 48 hours.

Why take a loan from IIFL?

When you take a loan from IIFL, you are provided with the following facilities:

You don’t need any additional collateral other than your securities.

Part prepayment facility to pay back a certain portion of your loan even before the due date.

Security swapping facility by which you can exchange financial instrument with another party..

The lowest interest rates available in the market.

Instant loan approval in less than 48 hours.

Interest charged only on the amount utilized.

Loan against securities taken from IIFL is a simple and quick process, with instant loan approval and many other facilities. If you have any other query regarding loans and how you can take one, feel free to call IIFL. We are always happy to help.

Speaker's Profile


Nishant Jasapara

Mr. Nishant worked with IIFL as a Chartered Accountant and a Company Secretary. He has 15+ yrs of experience in the Retail lending space and has handled multiple product suites across Business Development, Sales, Product and Credit. Prior to joining IIFL, he has also worked with Tata Capital, ICICI Bank & Time of Money Ltd where he has handled multiple roles and responsibilities for Business Loans, Loan Against Securities and Consumer Durable Loans at different points in time.


What is loan against securities?

Unlike traditional loans where gold, property or car was given as collateral to obtain a loan, you can now take a loan by pledging your financial investments in the stock markets (shares, Mutual funds, bonds etc.) as collateral. This new and innovative credit service is known as ‘Loan against securities’.

What is the maximum amount of loan I can take against my securities?

If the loan is taken from an NBFC, there is no upper ceiling on the amount of the loan. However, if you opt to avail this service through a bank, you can only take a loan of Rs10 lakh against physical shares and Rs20 lakh against dematerialized shares.

Who is eligible to take a loan against securities?

An individual, a proprietory concern, Limited Liability Partnership, Private or a Public Limited Company and a Private trust are all eligible to take a loan against their securities held in the Indian financial market.

For what purposes is such a loan taken?

A loan against securities is usually taken to meet the needs of urgent funds for the working capital requirement of your business, for expanding business, for raising money to invest in the capital market or for personal use like child’s marriage, higher education or medical emergencies.

What are the products offered by different lenders under loan against securities?

Fixed term loans against shares, mutual funds, bonds, etc. are available. They have a tenure of 6-12 months and interest rate of 11% or higher. Overdraft facility is also available. It usually has a tenure of 12-24 months and rate of interest of 11% onwards.

What are the parameters reviewed by the lender before approving the loan?

The Credit Underwriting process reviews:

Security analysis

Client profile, security provider, and Vintage

Financial statements

Repayment and credit bureau history

What should be the nature of my security to be eligible for loan against security?

Securities are tagged as ‘good’ if they are:

Easily marketable

Stable and steady valuation

Easily transferable

Free from disabilities, and/or


What is the documentation needed to attain a loan from IIFL?

You will need the following documents to get a loan from IIFL:

KYC (Know your customer) documents

Bank statements of 3 months

Latest audited financial statements and ITR/Networth certificate

Pledged security details/PMR reports

Standard loan agreements as per IIFL

Additional documents as required on case to case basis (documents varying as per different or unique situations)

Will I require any additional collateral for receiving a loan against my securities?

If you take a loan from IIFL, you are not required to pledge any additional collateral apart from your financial securities.

How much time will it take to get the loan approval?

Upon reviewing the securities, we provide the loan estimate in less than 2 hours. The approval decision on the loan is taken within 24 hours and upon approval, the amount is transferred to your account within 48 hours.

Do I obtain the full value of my securities as a loan?

You are eligible to get up to 50% of the current market value of your security for pledging equity/equity-oriented mutual funds. However, the margin on debt/debt based mutual funds is at the lender’s discretion.

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