Need quick funds but don’t want to sell your valuable stock investments? A loan against shares could be your ideal solution. This financial instrument allows you to leverage your existing equity investments to secure funds for various needs without selling your portfolio. With over 103 million active investors in India, this has become an increasingly popular option for those seeking liquidity while maintaining their market position.
In this comprehensive guide, we’ll explore everything you need to know about getting a loan against shares in India, including eligibility requirements, application processes, interest rates, and important considerations to keep in mind before pledging your securities.
What is a Loan Against Shares?
A loan against shares is a secured loan where you pledge your equity shares, mutual funds, or other eligible securities as collateral to obtain funds from a bank or NBFC (Non-Banking Financial Company). The loan amount is usually determined as a percentage of the market value of the securities you pledge, commonly known as the Loan-to-Value (LTV) ratio.
Unlike selling your investments, which would result in potential capital gains tax and loss of future growth opportunities, a loan against shares allows you to retain ownership of your securities. You continue to enjoy benefits such as dividends, bonuses, and capital appreciation while accessing the liquidity you need.
The interest rates for loans against shares generally range between 8% to 15% per annum, significantly lower than personal loans or credit card debt, making them an attractive option for short to medium-term funding requirements.
Can I Take a Loan Against Shares?
Yes, you can take a loan against your shares if you meet certain eligibility criteria. Most banks and NBFCs in India offer loans against shares to both individual and non-individual entities, including:
- Indian residents aged 18 years and above
- Non-resident Indians (NRIs) in some cases
- Proprietorship firms
- Partnership firms
- Private and public limited companies
However, not all shares qualify for pledging. Lenders typically maintain an approved list of securities that can be pledged. These generally include shares of well-established companies with good market capitalization, liquidity, and stability. Penny stocks or shares of companies with poor financial health are usually not accepted as collateral.
To be eligible, you must have a demat account where your shares are held electronically. Some lenders, like HDFC Bank, require you to have both a savings/current account and a demat account with them to avail of their digital loan against shares facility.
Can You Take Loans Against Stocks?
Yes, you can take loans against stocks, but the process involves pledging your shares rather than selling them. When you pledge shares, you’re essentially creating a lien on your securities in favor of the lender. This gives the lender the right to sell those securities if you default on your loan obligations.
The pledging process is regulated by depositories like NSDL (National Securities Depository Limited) and CDSL (Central Depository Services Limited). Here’s how it typically works:
- You submit a pledge request to your depository participant (DP)
- The DP forwards this request to the depository
- The depository places a lien on these shares within their system
- Once confirmed, the lender processes your loan application
- After approval, the loan amount is disbursed to your bank account
It’s important to note that loans against stocks differ from margin trading. While margin trading involves borrowing funds to purchase additional securities, loans against shares allow you to borrow against your existing portfolio for any purpose.
The regulatory framework for loans against shares in India is governed by the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI), ensuring transparency and protection for both lenders and borrowers.
What is the Maximum Limit of Loan Against Shares?
The maximum limit of a loan against shares is determined by the Loan-to-Value (LTV) ratio, which is the percentage of the market value of your pledged securities that you can borrow. As per RBI guidelines, the maximum LTV ratio for loans against shares is typically capped at 50%.
This means you can borrow up to 50% of the current market value of your pledged shares. For example, if you pledge shares worth ₹10 lakhs, you can get a loan of up to ₹5 lakhs.
However, the final loan amount can differ depending on various factors:
- The quality and volatility of the pledged securities
- The lender’s internal policies
- Your credit profile and repayment capacity
- Market conditions at the time of application
Different institutions have different minimum and maximum loan amounts:
- HDFC Bank offers loans ranging from ₹1 lakh to ₹20 lakhs through their digital process
- Zerodha Capital provides loans starting from as low as ₹25,000
- Bajaj Finserv provides loans up to ₹1,000 crores for large portfolios
- Bank of Baroda offers loans up to ₹5 crores secured by investments.
For high-value portfolios, some lenders may offer customized solutions with higher limits, subject to additional terms and conditions.
Also Read | Safe Investments with High Returns in India
Benefits of Taking a Loan Against Shares
Taking a loan against shares offers several advantages compared to other financing options:
Lower Interest Rates
Since these are secured loans, they typically come with interest rates that are 3-5% lower than personal loans. While personal loans might charge 12-24% interest, loans against shares generally range between 8-15% per annum, resulting in significant interest savings.
Retain Ownership and Benefits
You continue to own the pledged securities and receive all benefits such as dividends, bonuses, and rights issues. You also benefit from any appreciation in the value of your shares during the loan tenure.
No End-Use Restrictions
Unlike home loans or education loans, there are typically no restrictions on how you can use the funds. Whether it’s for business expansion, education expenses, medical emergencies, or personal needs, you have complete flexibility.
Quick Processing
Loans against shares are processed quickly, especially through digital channels. HDFC Bank claims to disburse funds in as little as three minutes through their digital process, while Zerodha Capital typically processes applications within one working day.
Minimal Documentation
The documentation requirements are minimal compared to other loans, especially if you already have an account with the lending institution. Basic KYC documents and details of the securities to be pledged are usually sufficient.
Flexible Repayment Options
Many lenders offer flexible repayment options, including interest-only payments during the loan tenure with principal repayment at maturity. This helps manage cash flow more effectively.
Risks and Considerations in Loan Against Shares
While loans against shares offer numerous benefits, they also come with certain risks that borrowers should be aware of:
Market Volatility Risk
The market value of pledged securities may vary depending on changing market conditions. If share prices fall significantly, the LTV ratio may increase beyond the permitted limit, triggering a margin call from the lender.
Margin Call Scenarios
If the value of your pledged securities drops, lenders may issue a margin call requiring you to either pledge additional securities or repay part of the loan to maintain the LTV ratio within acceptable limits. Failure to meet margin calls can result in the lender selling your pledged securities to recover the loan amount.
Impact on Long-term Investment Strategy
Pledging shares for a loan might restrict your ability to sell those shares when you want to. This could impact your long-term investment strategy, especially if you need to exit positions at specific price points.
Potential Loss of Securities
In case of default or inability to maintain the required LTV ratio, the lender has the right to sell your pledged securities. This could result in the loss of potentially valuable long-term investments.
Also Read | How to Take Loan Without Documents from Any Bank
Loan Against Shares HDFC
HDFC Bank is one of the leading providers of loans against shares in India, offering a completely digital process for existing customers.
Key Features
- Loan amount: ₹1 lakh to ₹20 lakhs
- Digital process with instant disbursement (as quick as 3 minutes)
- No physical documentation required
- An overdraft facility where interest applies solely to the amount actually used
- Wide range of eligible securities including equity shares, equity and debt mutual funds, NSCs, KVPs, and insurance policies
Eligibility and Requirements
To avail of HDFC Bank’s digital loan against shares, you need:
- A savings or current account with HDFC Bank
- A demat account with HDFC Bank
- Equity shares or equity mutual funds in demat form
- Single holder mode of demat operation
- Approved securities worth at least ₹2 lakhs
Application Process
HDFC Bank offers a simple three-step process:
- Log in to NetBanking and select the securities you want to pledge
- Accept the Terms of Agreement via OTP verification
- Pledge the shares and mutual funds online by confirming with another OTP
Once completed, the funds are instantly credited to your loan account, which you can access immediately.
Loan Against Shares Interest Rate
Interest rates for loans against shares vary across lenders and depend on several factors including the quality of pledged securities, loan amount, tenure, and your relationship with the lender.
Current Interest Rates by Provider
| Lender | Interest Rate (p.a.) | Processing Fee |
|---|---|---|
| HDFC Bank | 8.6% – 11.4% | Up to 1% of loan amount |
| Zerodha Capital | 11.5% (flat) | Nil |
| ICICI Bank | 9% – 12% | Up to 1.5% of loan amount |
| Bajaj Finserv | 10.6% – 13.9% | Between 1.5 to 2% of loan amount |
| Axis Bank | 9.6% – 12.4% | Up to 1% of loan amount |
Factors Affecting Interest Rates
Several factors can influence the interest rate offered to you:
- Quality of securities: Blue-chip stocks typically attract lower interest rates compared to mid or small-cap stocks
- Loan amount: Higher loan amounts may qualify for preferential rates
- Relationship with lender: Existing customers with good banking relationships might receive better rates
- Credit score: Having a higher credit score may lead to better interest rate offers
- Market conditions: Prevailing repo rates and market liquidity affect the base rates offered
Fixed vs. Floating Rates
Some lenders like Zerodha Capital offer fixed interest rates (currently 11.5% p.a.), while others like HDFC Bank offer floating rates linked to their Benchmark Lending Rate (REPO). Fixed rates provide certainty in repayment planning, while floating rates may decrease if the RBI reduces policy rates.
Loan Against Shares Zerodha
Zerodha Capital, the NBFC arm of India’s largest stock broker Zerodha, offers loans against securities to its customers through a streamlined digital process.
Key Features
- Minimum loan amount of ₹25,000 with no specified upper limit
- Fixed interest rate of 11.5% per annum
- No processing fees or hidden charges
- Direct cash transfer to your bank account
- Simple digital application process
- Loan approval within one working day
Eligibility and Process
To apply for a loan against shares through Zerodha Capital:
- You must have a Zerodha demat account
- Choose the securities and quantities from your demat account that you intend to pledge
- Review and digitally sign the loan application
- Wait for approval (typically within one working day)
- Receive the loan amount directly in your bank account
Zerodha Capital is planning to offer a fully online loan against securities service soon for holders of demat accounts outside Zerodha.
Also Read | How to Get a Loan Without a Job
Loan Against Shares Zerodha Interest Rate
Zerodha Capital offers a straightforward interest rate structure for its loan against securities product:
Current Interest Rate
As of May 2025, Zerodha Capital charges a flat annualized interest rate of 11.5% per annum for all clients. This rate is competitive compared to personal loans but slightly higher than some bank offerings for loans against shares.
Comparison with Other Brokers
When compared to other broker-linked NBFCs:
- Upstox offers loans against securities at 12-14% p.a.
- Angel One charges 11-13% p.a.
- 5paisa offers rates starting from 12% p.a.
This positions Zerodha’s offering competitively within the broker-NBFC segment, though traditional banks might offer lower rates in some cases.
Repayment Options
Zerodha Capital provides flexible repayment options:
- Monthly interest payments with principal repayment at maturity
- Ability to repay the loan either partially or in full before its maturity without incurring any prepayment charges
- Automatic deduction of interest from your linked bank account (with authorization)
Loan Against Shares Online
The digital transformation in financial services has made it possible to apply for and receive loans against shares entirely online, without visiting a branch or submitting physical documents.
Digital Application Process
Most major banks and NBFCs now offer end-to-end digital processes for loans against shares:
- Log in to your bank’s or broker’s online platform or mobile app
- Navigate to the loan against securities section
- Select the securities you wish to pledge from your demat holdings
- Specify the loan amount required (within eligible limits)
- Complete the digital KYC process if required
- Accept terms and conditions electronically
- Authenticate the transaction using OTP or other secure methods
- Receive instant approval and disbursement
Online Platforms Offering This Service
Several platforms offer fully digital loan against shares services:
- HDFC Bank: Through NetBanking with instant disbursement
- Zerodha Capital: Through their dedicated portal at zerodhacapital.com
- ICICI Bank: Via their internet banking platform
- Bajaj Finserv: Through their website and mobile app
- Groww: Facilitates the process through their investment platform
Digital Documentation Requirements
For online applications, you typically need to provide:
- Digital KYC verification (if not already completed)
- PAN card details
- Bank account information for disbursement
- E-signature or OTP-based consent
- Income details (for higher loan amounts)
The entire process can be completed in minutes, with some platforms like HDFC Bank claiming disbursement times as low as three minutes.
Loan Against Shares CDSL
The Central Depository Services Limited (CDSL) plays a crucial role in the loan against shares process as one of India’s primary securities depositories.
Role of CDSL in the Pledging Process
CDSL facilitates the pledging of securities by:
- Maintaining electronic records of securities ownership
- Processing pledge and unpledge requests
- Creating and releasing liens on pledged securities
- Ensuring secure and transparent pledge transactions
- Providing a standardized process across different lenders
How Shares are Pledged Through CDSL
The pledging process through CDSL involves several steps:
- The borrower initiates a pledge request through their depository participant (DP)
- The DP forwards this request to CDSL
- CDSL records the pledge in its system and creates a lien on the securities
- The lender receives confirmation of the pledge
- Based on this confirmation, the lender disburses the loan
- When the loan is repaid, an unpledge request follows the same route in reverse
CDSL’s Specific Procedures
CDSL has specific procedures for pledge transactions:
- A distinct pledge ID is given to every pledge transaction for tracking purposes.
- Both the pledgor (borrower) and pledgee (lender) must have demat accounts
- Corporate actions such as dividends and bonuses on pledged securities are still credited to the account of the pledgor
- CDSL charges a fee for pledge and unpledge transactions (typically ₹20 per ISIN)
- Partial pledging and unpledging of securities is supported
Loan Against Shares Maximum Limit
Understanding the maximum limits for loans against shares helps in planning your borrowing strategy effectively.
Detailed Breakdown of Maximum Limits by Provider
| Provider | Minimum Amount | Maximum Amount | LTV Ratio |
|---|---|---|---|
| HDFC Bank | ₹1 lakh | ₹20 lakhs (digital process) | Up to 50% |
| Zerodha Capital | ₹25,000 | Based on portfolio value | Up to 50% |
| Bajaj Finserv | ₹5 lakhs | Up to ₹1,000 crores | Up to 50% |
| Bank of Baroda | ₹1 lakh | ₹5 crores | Up to 50% |
| ICICI Bank | ₹50,000 | Based on portfolio value | Up to 50% |
How Portfolio Value Affects Maximum Limit
The value and composition of your portfolio directly impact your maximum loan limit:
- Blue-chip stocks typically qualify for higher LTV ratios (closer to 50%)
- Mid and small-cap stocks may have lower LTV ratios (30-40%)
- Diversified portfolios may receive more favorable terms
- Highly volatile stocks might be assigned lower LTV ratios or excluded entirely
- Each lender maintains its own list of approved securities with specific LTV ratios
Special Considerations for High-Value Portfolios
For high-value portfolios (typically above ₹1 crore), special considerations may apply:
- Customized interest rates and terms
- Relationship-based pricing
- Higher maximum limits beyond standard offerings
- Dedicated relationship managers
- More flexible repayment options
- Possibility of negotiating better LTV ratios
Loan Against Shares Groww
Groww, one of India’s fastest-growing investment platforms, facilitates loans against securities for its users through its pledging feature.
Groww’s Loan Against Securities Offering
While Groww itself is not a lender, it provides a platform for its users to pledge their securities to obtain loans from partner banks and NBFCs. The process involves:
- Creating a Broker Pledge Request Form (PRF) using Groww
- Submitting this form to your chosen bank or NBFC
- Verification and processing by Groww
- Televerification with the demat account holder
- Processing of the pledge request
Process Specific to Groww
To initiate a loan against securities through Groww:
- Contact Groww support at support@groww.in requesting a Broker Pledge Request Form
- FComplete the form by providing the details of the securities you wish to pledge
- Sign the form and email it back to Groww for verification
- Submit a physical copy of the signed form as required by compliance norms
- Complete televerification when contacted by Groww
- Once confirmed, Groww processes the pledge request
- Continue with your loan application at the bank or NBFC you have selected
For pledging more than 20 ISINs (International Securities Identification Numbers), multiple forms and annexures with details need to be attached.
Charges and Considerations
When using Groww for pledging securities:
- Groww charges ₹20 per ISIN for pledging (e.g., pledging 3 different securities would cost ₹60)
- The actual loan terms, interest rates, and processing fees are determined by the lending institution, not Groww
- You retain ownership of the pledged securities and continue to receive benefits like dividends
- The securities cannot be sold until the pledge is removed
How to Apply for a Loan Against Shares
Applying for a loan against shares involves several steps that vary slightly depending on the lender you choose.
Step-by-Step Application Process
- Select a lender: Research and compare offerings from different banks and NBFCs
- Check eligibility: Ensure your securities are on the lender’s approved list
- Prepare documents: Gather required KYC documents and information about securities
- Submit application: Apply online through the lender’s website/app or visit a branch
- Pledge securities: Complete the pledging process through your depository participant
- Loan approval: The lender evaluates your application and pledged securities
- Disbursement: Once approved, the loan amount is transferred to your bank account
Required Documents
Typically, you’ll need to provide:
- Identity proof (PAN card, Aadhaar card)
- Address proof (utility bills, passport)
- Income proof (for higher loan amounts)
- Bank account statements
- Details of securities to be pledged
- Completed loan application form
- Passport-sized photographs
Timeline Expectations
The timeline for loan processing varies by lender:
- Digital process (HDFC Bank): As quick as 3 minutes
- Zerodha Capital: 1 working day
- Traditional banks (offline process): 2-5 working days
- NBFCs: 1-3 working days
Digital processes are significantly faster as they eliminate the need for physical documentation and manual verification.
Repayment Options and Strategies
Understanding the various repayment options and developing effective strategies can help you manage your loan against shares efficiently.
Tenure Options
Loans against shares typically come with the following tenure options:
- Short-term: 3-6 months
- Medium-term: 6-12 months
- Long-term: 12-36 months
Most lenders offer a default tenure of 12 months, which can be renewed upon review. Zerodha Capital, for instance, provides a 1-year tenure for their loans against securities.
Prepayment Policies
Most loans against shares allow prepayment with minimal or no penalties:
- Zerodha Capital allows prepayment without any charges
- HDFC Bank permits partial or full prepayment without penalties
- Certain lenders might require a minimum lock-in period, usually ranging from 1 to 3 months
- Prepayment can help reduce interest costs significantly
Interest-Only vs. Principal+Interest Payments
Loans against shares typically offer two repayment structures:
- Interest-only payments: Make payments covering just the interest throughout the loan term, with the principal due at maturity.
- EMI (Equated Monthly Installments): Pay equal monthly amounts that include both principal and interest.
The interest-only option provides lower monthly outflows but requires a lump sum payment at the end. The EMI option results in higher monthly payments but gradually reduces the loan balance.
Managing Repayments Effectively
To manage your loan against shares effectively:
- Enable automatic payments to ensure you never miss a due date.
- Monitor the value of pledged securities regularly
- Maintain a buffer to address potential margin calls
- Consider prepaying the loan if you receive unexpected funds
- Plan for principal repayment well in advance if opting for interest-only payments
- Refinance at lower rates if substantial interest rate reductions occur during your loan tenure
FAQs
What occurs if the value of my pledged shares drops substantially?
If the value of your pledged shares falls significantly, increasing the LTV ratio beyond the permitted limit (typically 50%), the lender will issue a margin call. You’ll need to either pledge additional securities or repay part of the loan to bring the LTV ratio back within limits. If you do not fulfill the margin call requirements, the lender has the right to sell your pledged securities to recoup the loan amount.
Can I sell my pledged shares before repaying the loan?
No, you cannot sell pledged shares until the pledge is removed. To sell pledged shares, you must either repay the corresponding portion of the loan or pledge additional securities to maintain the required LTV ratio. Once the lender releases the pledge on specific shares, you can proceed to sell them.
Are there any tax benefits for loans against shares?
There are no direct tax benefits for personal loans against shares. However, if the loan is taken for business use or for buying or building property, you might qualify for tax deductions on the interest paid under applicable sections of the Income Tax Act. Consult a tax advisor for guidance specific to your situation.
How is the interest calculated on loans against shares?
Interest on loans against shares is typically calculated on a reducing balance basis for EMI repayments or on the outstanding amount for overdraft facilities. For overdraft facilities, you pay interest only on the amount utilized, not on the sanctioned limit. Interest is usually compounded monthly and charged to your account as per the agreed schedule.
Can NRIs avail loans against shares in India?
Yes, NRIs can avail loans against shares in India, subject to certain conditions. The shares must be held in an NRO (Non-Resident Ordinary) demat account, and the loan proceeds must be credited to an NRO account. Certain lenders might impose extra conditions or limitations for borrowers who are NRIs. FEMA (Foreign Exchange Management Act) regulations also apply to such transactions.
What happens to dividends and corporate actions on pledged shares?
You continue to receive all benefits from pledged shares, including dividends, bonuses, rights issues, and other corporate actions. These are credited directly to your account as you remain the owner of the shares. However, you cannot sell or transfer the pledged shares until the pledge is removed.
Final Thoughts
A loan against shares offers a strategic way to access liquidity without disrupting your investment portfolio. By leveraging your existing investments as collateral, you can secure funds at competitive interest rates while continuing to benefit from potential market appreciation and corporate actions.
However, it’s crucial to understand the risks involved, particularly those related to market volatility and margin calls. Before opting for a loan against shares, carefully assess your repayment capacity and have a clear plan for utilizing and repaying the funds.
The digital transformation in financial services has made the process of obtaining loans against shares significantly more convenient, with some lenders offering instant approval and disbursement. By comparing different providers, understanding their terms and conditions, and selecting the option that best suits your needs, you can make the most of this flexible financing solution.
Remember that loans against shares are best suited for short to medium-term needs rather than long-term financing requirements. With proper planning and management, they can be a valuable tool in your overall financial strategy.
About the Author
I’m Om Prakash — founder of Paisagyaan.com, a blog focused on making financial knowledge simple, relatable, and useful for everyday Indians. My journey includes over 10 years of navigating the Indian stock market, learning the hard way about investments, debts and real estate.
Read About the Author in detail, who lost 75 lakh rupees during 2009 to 2019 which would be 4.5 crore now in 2025.
But here’s what those losses taught me: Financial knowledge matters — deeply, so you don’t repeat my mistakes. If you’re just starting out or have already faced setbacks, this blog is for you for educational purpose and not advice.
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