A loan against Securities (LAS) offers you instant liquidity. You don’t have to sell your securities. All you have to do is pledge your securities in favor of a bank. They will then grant you an overdraft facility up to a value determined on the basis of the securities pledged by you.
Loan against Shares is an overdraft facility that gives you the power to buy the latest car, acquire real estate or invest in a new rights issue without having to sell and disturb your carefully built portfolio. The purpose of loans against shares is to take care of all your investment as well as personal needs, meet contingencies, subscribing to primary issues, rights issues. It is the ideal way to get liquidity without liquidating them.
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Every bank has its individual list of approved securities (a list of companies) against which the bank provides a loan. Both, resident and non-resident Indians can take a loan against the shares. Shares must be held in the physical form or in the Demat form. So, one can get a loan only if the borrower possess shares which are as per the bank's list.
Features
- Loan amount ranges between a minimum of Rs 1 Lakh and maximum of Rs 10 Lakh (Physical), Rs 20 Lakh (Demat)
- Normally 65% of the scrip’s pledged are available as overdraft (if shares are Demat) or 50% (if shares are physical).
- Generally physical shares are accepted in market lots only.
- There is a Minimum number of scrip’s and Maximum number of scrip’s which are accepted by banks. Normally minimum might be 1 and maximum 20;though for a few banks the maximum can be "no limit"
- Investments in mutual fund units that are exempt from capital gains tax (under Sections 54EA/EB) are not accepted as collateral.
- Loans against mutual fund units are based on their NAV value. The base NAV could be the last closing NAV or the average NAV of the previous week.
To learn how mutual fund investments can help you get a loan, Just Give a Missed Call to IndianMoney.com on 02261816111 and ask our experts!
Criteria
- The shares should be on the approved list of the bank which would be revised periodically.
- The shares should be fully paid up.
- Scrip’s in the name of corporate, minors, firms, HUF, and NRIs will not be eligible for finance under this scheme.
- Individuals cannot pledge scrip’s of companies of which they themselves are directors/Promoters.
- All shares should be in their marketable lots only.
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