A loan against shares lets you borrow cash by pledging the shares, ETFs, bonds or mutual funds in your demat account — without selling them. You typically get an overdraft of around 50% of your equity holdings' value (lower for volatile scrips), pay interest only on the amount you actually use (roughly 9–13% in 2026), and keep all upside, dividends and ownership.
What is a loan against shares?
A loan against shares (a form of loan against securities, or LAS) is a secured credit facility where you pledge approved financial assets held in your demat account as collateral. The lender places a lien on those securities, sanctions a borrowing limit against their value, and releases the pledge once you repay.
The key idea is that you do not sell your investments. Your shares stay in your demat, you continue to receive dividends and bonus issues, and you retain the long-term growth — you simply unlock liquidity against them. This makes LAS popular for short-term needs: a business cash crunch, a medical bill, a property down-payment, or bridging a gap before a bonus or sale.
Because the loan is secured, interest rates are usually lower than an unsecured personal loan, and processing is faster since the collateral is liquid and easy to value.
What can you pledge?
Most banks and NBFCs accept a range of demat-held instruments, though the exact "approved securities" list varies by lender and is reviewed periodically:
- Listed equity shares — only those on the lender's approved scrip list (usually large-cap, liquid stocks; penny stocks and illiquid counters are excluded).
- Equity & debt mutual fund units — often pledged via the registrar (CAMS/KFintech) with a lien marked.
- Exchange-traded funds (ETFs) — index and gold ETFs are commonly accepted.
- Bonds and debentures — listed, rated instruments; government securities and certain tax-free bonds.
- Other assets some lenders accept: sovereign gold bonds, NSC, KVP, and insurance policies (though those often fall under separate products).
If your portfolio is mostly mutual funds rather than direct stocks, a dedicated loan against mutual funds facility may offer cleaner terms. For comparison with other collateral-based options, see our guides on a loan against fixed deposit and a loan against LIC policy.
How much can you borrow? Understanding LTV
The amount you can borrow is set by the loan-to-value (LTV) ratio — the percentage of your collateral's market value the lender will lend against.
| Collateral type | Typical LTV range (2026) | Why |
|---|---|---|
| Listed equity shares | ~45–50% | Equity prices swing daily; a buffer protects the lender |
| Volatile / mid-cap scrips | Lower (often 30–40% or excluded) | Higher price risk demands a bigger cushion |
| Equity mutual funds | ~45–50% | Similar volatility to direct equity |
| Debt mutual funds | Up to ~70–80% | Lower price volatility |
| Bonds / G-secs | Higher (often 70–85%) | Stable, predictable value |
So if you pledge a share portfolio worth ₹10 lakh and the LTV is 50%, your sanctioned limit is around ₹5 lakh. The lower LTV on equities is deliberate: if prices fall, the lender needs the collateral to still cover the outstanding loan.
LTV and margin requirements for loans against securities are governed by RBI norms for the lender. Importantly, the RBI's revised loan-against-securities directions (RBI/2025-26/211, notified 30 March 2026) take effect from 1 July 2026, superseding the earlier version — so the precise regulatory LTV ceilings and margin rules that apply to your loan depend on the date and your specific lender. Treat the percentages above as typical market ranges, and confirm the current applicable limit with the lender at the time you borrow.
The overdraft structure — why you pay interest only on what you use
Most loans against shares are structured as an overdraft (OD) or a current-account-style credit line rather than a lump-sum term loan. This is the single most useful feature of LAS:
- The lender sanctions a limit (say ₹5 lakh).
- You withdraw only what you need, when you need it.
- Interest accrues only on the amount actually utilised, calculated daily — not on the full sanctioned limit.
- You can repay and re-draw within the limit, with no foreclosure penalty in most OD facilities.
So if you have a ₹5 lakh limit but use only ₹1 lakh for 20 days, you pay interest on ₹1 lakh for 20 days — nothing on the unused ₹4 lakh. This makes LAS far cheaper than a term loan for irregular or short-term cash needs, where a regular EMI on the full amount would waste interest.
Some lenders also offer LAS as a term loan with EMIs — useful if you want disciplined, scheduled repayment. Choose the structure that matches your cash-flow pattern.
Interest rates and charges in 2026
Loan-against-shares rates in 2026 typically fall in the ~9–13% per annum range, varying by lender, collateral mix, loan size and your relationship with the bank. Rates on debt-fund or bond collateral can sit at the lower end; pure-equity pledges usually price higher because of volatility.
Most retail floating-rate loans in India are linked to an external benchmark (EBLR, usually repo-linked), so when the policy repo rate changes, your rate resets at the next reset date. You can read how that mechanism flows through to borrowing costs in our guide on the RBI repo rate's impact on EMIs, and on choosing between rate types in fixed vs floating interest rates.
Beyond interest, budget for:
- Processing fee — typically a small percentage of the limit or a flat fee.
- GST at 18% on the processing fee and other charges (not on the principal or interest).
- Annual renewal / maintenance charges on the OD facility.
- Pledge creation / DP charges for marking the lien.
- Documentation / stamp duty as applicable.
Always ask for the all-in cost, not just the headline rate.
Margin calls and the top-up obligation
This is the part borrowers most often underestimate. Because your collateral is market-linked, its value moves every day — and so does your effective LTV.
If the value of your pledged shares falls, the loan outstanding becomes a larger percentage of the (now lower) collateral value. Once it breaches the lender's threshold, you get a margin call: a demand to restore the margin within a short window (often just 1–3 working days). You can satisfy it by:
- Pledging additional securities to top up the collateral, or
- Repaying part of the loan to bring the LTV back in line.
If you do neither in time, the lender is entitled to sell (liquidate) your pledged shares — possibly at a depressed price during a market dip — to recover its dues. You may also face the tax consequences of that forced sale: under the rules in force for FY2025-26, equity sold within 12 months attracts STCG at 20%, and gains on holdings over 12 months attract LTCG at 12.5% (with a ₹1.25 lakh annual exemption on equity LTCG). A margin-call liquidation can therefore trigger an unplanned tax bill on top of the loss of your investment.
The real risks of pledging volatile equity
A loan against shares is genuinely useful, but the risks are real and asymmetric — you keep the modest interest saving, but you carry the full downside of a market fall:
- Margin-call risk — a sharp correction can force a top-up or liquidation at the worst possible time.
- Forced selling at a loss — you lose both the asset and any future recovery, and may crystallise capital-gains tax.
- Concentration risk — pledging a portfolio heavily weighted in one or two scrips amplifies volatility.
- Rate risk — floating LAS rates can rise if the repo rate moves up.
- Behavioural risk — easy access to an OD line can tempt over-leveraging against your own savings.
A sensible rule: borrow well below your sanctioned limit so you have natural headroom against a price drop, and avoid pledging money you'd need to keep safe for goals like retirement. Our financial planner can help you weigh borrowing against liquidating, and you can sense-check repayment comfort with the loan eligibility calculator.
Is a loan against shares right for you?
Consider LAS when you have a quality, diversified portfolio, a short-term liquidity need, and the discipline to manage a margin call. It can be cheaper and faster than alternatives, and it preserves your long-term compounding.
Think twice if your need is long-term, your portfolio is concentrated or volatile, or you'd struggle to fund a sudden top-up — in those cases an unsecured personal loan (no collateral at risk) or simply redeeming a small, non-core holding may be safer. If you're comparing against selling mutual funds, our loan against mutual funds vs redeeming guide breaks down the trade-offs.
Want to see your options without commitment? Check your eligibility on RupeeQuik's apply page — it's free, uses a soft pull, and has no impact on your credit score. You can also compare lenders side by side before you decide.
Rates, LTV limits and regulatory rules vary by lender and change over time — always verify the current terms directly with your lender before borrowing. RupeeQuik connects you to RBI-regulated lending partners.
Frequently Asked Questions
Do I keep dividends and ownership of pledged shares?
Yes. A pledge only places a lien on your securities as collateral — you remain the owner. You continue to receive dividends, bonus shares and rights issues, and you retain the long-term capital appreciation. The lender simply cannot release the lien until you repay.
How is interest charged on a loan against shares?
In the common overdraft structure, interest is charged only on the amount you actually withdraw and use, calculated on a daily basis — not on the full sanctioned limit. If you draw nothing, you pay no interest (though an annual maintenance/renewal fee may still apply).
What happens during a margin call?
If your pledged shares fall in value and the loan breaches the lender's LTV threshold, you receive a margin call to restore the margin within a short window (often 1–3 working days). You can pledge more securities or repay part of the loan. If you don't act in time, the lender can sell your pledged shares to recover dues.
Can I pledge mutual funds and ETFs, not just stocks?
Yes. Most lenders accept equity and debt mutual fund units, ETFs, listed bonds and government securities, in addition to approved listed shares. Debt funds and bonds usually carry a higher LTV (lower volatility) than equity. The exact approved list and LTV vary by lender — see our dedicated loan against mutual funds guide for fund-specific terms.
Is GST charged on a loan against shares?
GST at 18% applies to the loan's processing fee and other service charges — not to the principal you borrow or the interest you pay. Factor this into your all-in cost when comparing lenders.
