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What is Loan against securities (LAS)?

Loan against securities (LAS) is a facility wherein you can pledge the stocks and mutual funds in your DEMAT account and avail a loan against it. LAS is similar to loan against gold or loan against property.

What are the features of Loan against securities?
  • Minimum loan amount of Rs. 25,000;
  • Only outstanding monthly interest is due every month & principal can be repaid any time within 12 months;
  • Completely online process;
  • Loan amount is credited into your bank account within 2 working days;
  • Flat annualised interest rate of 10.5% for all Zerodha clients
Whom should I pledge the securities to?

To avail loan against the securities, you are required to pledge the securities to Zerodha Capital Private Limited. Zerodha Capital, holds a Non Banking Financial Company (NBFC) licence from ‘The Reserve Bank of India (RBI)’, which permits the company to lend.

What is the process of availing the loan?

Loan against securities can be availed by following few simple steps:

  • Onboard as a customer.
  • Decide the amount of loan you need.
  • Accordingly select the securities you wish to pledge.
  • E-Sign the loan documents.
  • Create a pledge via OTP.
  • Wait for the money to hit your bank account.

The entire process is online and takes a few minutes to complete.

How much loan can I get?

The amount of loan depends on the market value of the securities you hold. RBI permits the NBFC to lend upto 50% value of the securities you pledge with us as collateral. For example, if the value of the securities is Rs.5,00,000/-, then a maximum loan of Rs.2,50,000/- can be disbursed.

At Zerodha, loan amount available to you for disbursal is 45% of the value of the securities you bring in (subject to change from time to time). This is kept at 45% to avoid constant notifications and reminders in case the value of the shares reduces anywhere between 0.1-5%.

What are the other charges incurred while availing a loan against securities?
Zerodha Capital – List of charges
Processing Fee for each Loan ₹436
Pledge (per scrip) ₹32
Unpledge (per scrip) ₹32
Invocation of Pledge ₹20
Can you share more details on Loan to value ratio (LTV)?

If the value of the assets you have is ₹5,00,000/- then as per RBI’s guidelines, the maximum loan you can get is ₹2,50,000/-.

Here ‘Value’ refers to the value of the securities that you hold, which is Rs.5,00,000 and ‘loan’, refers to the amount of loan disbursed to you, which is ₹2,50,000.

The LTV ratio is -
= 2,50,000 / 5,00,000
= 50%

As per the RBI regulations, the borrower is expected to maintain a 50% LTV during the loan tenure.

Can the LTV fluctuate?

LTV increases when the value of the securities decreases. For example, assume the value of the securities decreases to ₹4,50,000. The new LTV ratio is –

2,50,000 / 4,50,000
= 55%

To bring back the LTV to 50%, you either need to pledge more securities or pay back some of your principal amount to reduce the principal outstanding.

LTV decreases when the value of the securities increases. No action is required if the value of the securities increases.

What would happen if I do not maintain my LTV ratio as per the stipulated 50%?

RBI has stipulated that clients availing loans against securities from NBFCs, shall always maintain an LTV of 50%. Any shortfalls in this regard shall be made good within a 7 day period. As the LTV may constantly fluctuate, you must keep in mind the below timeline to make good of the 50% LTV. To bring back the LTV to 50%, you may either further pledge additional securities or repay a certain amount of the loan.

Loan to value (LTV) ratio variation from RBI stipulated of 50% (or lower) Time to make good & bring back LTV to 50%
LTV between upto 60% Notice day plus 5 days
LTV higher than 60% Next day after notice day (must be done by 4pm)
Will I be warned if the LTV ratio increases?

Yes, in case the LTV goes higher than the required threshold, then we will communicate the same with you (also called the LTV calls), and request you to either bring in more securities (to the extent of the short fall) or repay part of the principal outstanding.

How can I pledge additional securities to maintain my LTV?

You can visit the loans dashboard on Console and pledge additional securities with us to maintain the LTV position.

What happens if I don't take the necessary action to bring down the LTV?

The NBFC will be forced to invoke the pledge and liquidate the securities (partly or fully) to make good for the shortfall in LTV.

What is the interest rate for the loan?

The interest rate for LAS loan is 10.5%. The interest rate is not constant and is subjected to change depending on the prevailing economic situation.

Can you explain how interest repayments are made?

LAS loans require you to service just the interest rate applicable on a month on month basis. There is no concept of EMI applicable to LAS loans. For example, if you have borrowed Rs.2,50,000/- at an interest rate of 10.5%, then the daily interest rate is –

10.5% / 365
= 0.0287%

The daily interest amount is –

0.0287% * 2,50,000
= ₹71.91/-

So for a month with 30 days, the interest amount applicable is –

71.91 * 30
= ₹2,157.534

What happens if I miss making an interest repayment?

If you miss repaying the interest amount or if you partially repay the interest amount, a penalty will be levied on the defaulted amount. The penalty is dependent on the ‘Penal interest rate’.

How much is the penal interest rate?

The penal interest rate is 18% per annum.

What is the minimum and maximum amount of loan I can avail?

The minimum amount of loan is ₹25,000/- and the maximum amount is restricted to ₹1,00,00,000/-. This maximum loan amount is cumulative across all loans you may have with Zerodha Capital, including top-up loans if any.

Can I pre-close my loan early? Are there any charges?

Yes, you can pre-close and pre-pay your loan amount at any time. For example, if you repay your loan amount within 2 months, you will only have to pay interest on your loan for 2 months and nothing more.

There are no charges with respect to prepayment or closing your loan early.

What is CKYC Number?

CKYC (Central KYC) is the central repository from CERSAI, where all KYC information is uploaded by all financial institutions across entities regulated by SEBI, RBI, IRDA & PFRDA. All persons who have completed their KYC with any financial institution, would receive a CKYC number, which is requested by Zerodha Capital at the beginning, so that KYC information can be fetched directly from CKYC.

What is FATCA?

It stands for Foreign Account Tax Compliance Act. The Indian Government signed the Inter-Governmental Agreement (IGA) with USA in 2015 for implementation of FATCA. As per the agreement, Indian tax officials must obtain certain account information from US taxpayers. The goal was to ensure US citizens’ tax compliance and increase transparency for their Internal Revenue Service (IRS). This gave a legal basis for the Reporting Financial Institutions to maintain and report personal and income details.

What is Politically Exposed Person (PEP)?

There are three kinds of people who may come under the definition of PEP:

  • A Political Figure: a senior official in the executive, legislative, administrative, military or judicial branches of government.
  • The Immediate Family of Political Figure: typically includes the politician’s parents, siblings, spouse, children, and in-laws.
  • A Close Associate of a Political Figure: a person who is widely and publicly known to maintain an unusually close relationship with the political figure, and includes a person who is in a position to conduct financial transactions on behalf of the political figure.

PEPs are considered to be high risk customers for financial institutions because owing to their position of prominence, they are more likely to be presented with opportunities for acquiring assets through unlawful means or being involved in embezzlement, corruption or other serious offences of money laundering.

What securities can I pledge as collateral to avail a loan?

RBI only permits a particular list of Group 1 securities to be allowed for collateralising for a loan by NBFCs. Zerodha Capital has its own list of curated scrips from the Group 1 list of securities, as per its risk management policies, which are eligible and permitted for the loan against securities product. The approved list of securities can be found here.

Why is my tenure 1 year and what is ‘Auto Renewable’?

All loans at Zerodha Capital are demand loans. Demand loans are short term loans which need to be repaid within one year. Demand loans need not be structured similar to loans which have repayments structured as an EMI repayment.

Therefore, demand loans are flexible where only minimum outstanding interest can be paid every month, and principal can be repaid anytime within 1 year.

All loans at Zerodha Capital have a tenure of 12 months, after which the unpaid amount would automatically renew as a new loan & customers would be required to execute a new set of loan documents.

What is Sanction Limit?

Sanction Limit is the maximum amount of loan that can be availed by you, after E-Signing one master loan agreement.

The Sanction Limit provided to customers of Zerodha Capital is generally ₹ 5,00,000 (Five Lakh), or up to 3 times your holdings amount; whichever is higher.

At any point in the future, if you wish to bring in/purchase additional stocks in your Zerodha account and take a loan against it for an amount greater than the current Sanction Limit, you would require to E-Sign a new loan agreement and enhance your Sanction Limit.

Are there any Processing Fee charges for availing a loan via the LAS at Zerodha Capital?

Yes, you would be paying a flat fee of ₹436 during your online loan application process irrespective of the loan amount. The breakup of ₹436 is provided below:

  • ₹200 for stamp duty charges as per Karnataka for the loan application.
  • ₹200 + 18% GST (₹236) towards the processing of the loan application.
Why does my KYC take upto 72 hours to update?

CKYC (Central KYC) is the central repository maintained by CERSAI. Any update in KYC that is made by the financial institution (such as Zerodha) and uploaded to CKYC takes upto 72 hours for the information to be updated.

Am I required to have a demat account with Zerodha to avail loan against securities online?

At this time, we can offer loans against securities through the online e-sign process only to clients having demat accounts with Zerodha.

How do I avail a loan, in case I do not have a Zerodha demat account?

To avail a speedy and completely online disbursal process for the loan, we recommend you open a Zerodha demat account here.

If you wish to avail a loan against securities via a different demat account/broker, then please visit our office in Bangalore to complete your documentation process & to check your eligibility.
Our office address:
Zerodha Capital Private Ltd., #153/154, 4th Cross Rd, JP Nagar 4th Phase, Dollars Colony, Bengaluru - 560078

What terms and documents do I need to agree for availing a loan against my securities?

There are mainly 3 documents which you would have to agree to to successfully complete your loan application:

  • Term Sheet: A Term Sheet is an acknowledgement provided by you, with respect to understanding all the terms, policies, conditions with respect to each loan/disbursement availed, along with the details of the securities pledged to avail the loan;
  • Master Loan Agreement: A Master Loan Agreement is a written contract between you & Zerodha, stating in detail all terms, conditions, and stipulations regarding the loan, and such future part loans/disbursements falling under the same sanctioned loan; and
  • E-Pledge consent: An e-pledge consent is a feature provided by the depository, i.e. CDSL, that is an OTP based mechanism, to allow you to pledge your stocks with Zerodha Capital and process a loan based on such pledged stocks.
What is the due date to repay the monthly interest due for my loan?

The due date to make repayment with respect to your monthly outstanding amount / interest is the 7th of every month at Zerodha Capital.

How can I repay my loan?

You could login to your Zerodha account, visit Console, and visit the ‘Repayment’ link on your dashboard to make a repayment with respect to your loan at any point of time.

You may make a repayment towards your loan through netbanking, debit cards or UPI. We will not be able to accept repayments through credit cards, NEFT/RTGS, cash or cheques.

How can I close my loan?

You can choose to close your loan by visiting the ‘Close Loan’ tab on the Console loan dashboard. Upon clicking this tab, you will be shown the total amount due from you, including principal and interest. Once you repay the total amount due, we will close the loan.

Please note that we may need up to 3 working days after you repay your loan to unpledge your securities and return them to your account. Rest assured, we will try to expedite this as much as possible.

Will I receive any taxation benefits with respect to the interest payable on my loan?

No, you will not receive any taxation benefits with respect to the interest repaid on the loan with respect to LAS.

Will my action of moving a particular scrip / shares for securing a loan, remove such shares from being considered as long term holdings? Will I be taxed under Long term capital gains or Short term capital gains for shares/scrips which I provided as collateral and have held for over a year?

There will be no changes with respect to tax consideration with respect to the shares which you provide as collateral for securing the loan. Only in the event of your shares being sold, due to non-repayment of loan amount or as per your instructions, would there be a change of duration for calculating taxes.

I am an NRI. Can I avail a loan from Zerodha Capital?

No, currently we offer LAS only for Resident Indian Individual Accounts.

Can I avail a loan for securities held in the name of an HUF or private company?

No, currently we will not be able to offer LAS for non-individual accounts.

Still have queries?

Please create a ticket here to contact support.