Loan Against Shares: Pledge Stocks, Get Funds Fast
Loan Against Shares and Securities: How to Borrow Against Your Stock Portfolio in India
If you have a stock portfolio but need cash urgently, selling shares may not be the best option, especially in a volatile market. A loan against shares (also called a pledging loan or loan against securities) lets you borrow money by pledging your equity shares or other securities as collateral.
Overview of Loan Against Shares
Loans against shares are offered by banks and NBFCs to individuals who hold shares in their demat accounts. The lender places a pledge on the shares through the depository (NSDL or CDSL), and the borrower gets a loan based on a percentage of the current market value. The shares remain in your demat account throughout the tenure.
SEBI and RBI together regulate this market. As per current SEBI guidelines, the pledge mechanism has been strengthened with a two-factor authentication system (TPIN/OTP from the investor) to prevent misuse. Banks like HDFC Bank, ICICI Bank, Kotak Mahindra Bank, and NBFCs like IIFL Finance and Bajaj Finserv offer this product.
Interest Rates and LTV
| Lender | Interest Rate (Per Annum) | LTV on Equity | LTV on Debt Securities |
|---|---|---|---|
| HDFC Bank | 10.50% – 13.50% | 50% | 80% |
| ICICI Bank | 10.50% – 14.00% | 50% | 80% |
| Kotak Mahindra Bank | 10.50% – 13.00% | 50% | 80% |
| IIFL Finance | 12.00% – 18.00% | 50% | 75% |
The maximum LTV on equity shares is capped at 50% of the market value as per RBI guidelines. This conservatism is because equity markets can be volatile, and a lower LTV protects both lender and borrower from margin calls.
Eligible Securities
Not all securities are eligible for pledging. Lenders maintain an approved list of securities typically including:
- Nifty 50 and Sensex component stocks
- Top 500 BSE-listed companies by market cap
- Central and state government bonds
- AAA/AA-rated corporate bonds and debentures
- Debt mutual funds (in some cases)
Penny stocks, suspended stocks, and shares under special surveillance are typically not accepted.
Eligibility for Borrowers
- Indian resident with a demat account (NSDL or CDSL)
- Minimum portfolio value of Rs. 50,000 to Rs. 1,00,000 (varies by lender)
- Shares must be in approved list of eligible securities
- Individual, HUF, and corporate entities may be eligible
Documents Required
- Aadhaar card and PAN card
- Demat account statement
- Bank account details
- TPIN or CDSL/NSDL authorisation for pledge creation
- Loan application form
Application Process
Online Pledge Creation
Most lenders now offer a fully digital process. You log into the lender’s app or website, select the shares to pledge, and authorise the pledge via OTP (TPIN for CDSL or NSDL’s T-PIN). The lender evaluates the eligible value, sanctions the loan, and credits funds to your account, often within the same day.
Margin Call Risk
If the value of your pledged shares falls below the required LTV threshold due to market movements, the lender will issue a margin call. You must either pledge additional shares or repay a portion of the loan within the specified time (usually 24 to 48 hours). Failure to meet a margin call may result in the lender selling some of your shares.
Frequently Asked Questions
Can I vote on company matters if my shares are pledged?
Yes. Pledging shares does not transfer ownership. You retain all shareholder rights including voting rights and dividends until the pledge is invoked by the lender.
Are dividends on pledged shares credited to me?
Yes. Dividends are credited to your bank account as usual, since you remain the legal owner of the shares.
How quickly can I get a loan against shares?
With digital pledge systems, the process can be completed within a few hours. Some platforms like IIFL Markets complete the entire process in under 30 minutes for existing customers.
What is the difference between pledging shares and selling shares for cash?
When you sell shares, you lose ownership and any future upside. When you pledge shares, you retain ownership, continue to earn dividends, and benefit from any price appreciation. You only pay interest on the loan, not give up the investment itself.
