Loan Against Securities (LAS) is a facility wherein stocks and mutual funds in the demat account can be pledged to avail loan against it. LAS is similar to a loan against gold or a loan against property.
The above-mentioned conditions are subject to change from time to time. Visit zerodhacapital.com/approved-list to know the list of approved stocks for LAS.
To avail loan against the securities, the securities must be pledged to Zerodha Capital Private Limited (ZCPL). ZCPL is a Non-Banking Financial Company (NBFC) registered with the Reserve Bank of India (RBI).
Loan against securities can be availed online in a few minutes by following these steps:
The amount of loan depends on the market value of the securities held in the demat account. The market value of securities is calculated as per the closing price as on the previous day from the date of loan disbursal. RBI permits an NBFC to lend up to 50% value of the securities pledged as collateral.
At Zerodha Capital Private Limited, the maximum loan amount available for disbursal is 45% of the market value of the securities. For example, if the value of the securities is ₹1,00,000, then a maximum loan of ₹45,000 can be disbursed. This is kept at 45% to avoid constant notifications and reminders in case the value of the shares reduces anywhere between 0.1-5%.
During the onboarding process, the securities from the holdings that are a part of the approved list of securities are fetched, and against each security, the amount of loan that can be disbursed is displayed. The approved list of securities can be found by visiting zerodhacapital.com/approved-list. The user can decide the security and the quantity to be pledged. Depending on the security and the quantity pledged, the final loan amount will be displayed.
A flat fee of ₹436 that is non-refundable must be paid during the online loan application process, irrespective of the loan amount. The breakup of ₹436 is as follows:
The list of charges (non-refundable) are as follows:
|Charges paid to Zerodha Capital Private Limited|
|Processing fee per loan||₹436|
|Confiscation charges (Equity)||0.7% of the sell value|
|Confiscation charges (Equity mutual fund)||1.5% of the sell value|
|Interest rate (subject to change from time to time)||
10.5% per annum
(Interest rate 11.5% effective from 1st Jan 2024)
|Penal charges (subject to change from time to time)||18% per annum|
|Charges paid to your Depository Participant(DP)*|
|Pledging (per security)||₹32|
|Unpledging (per security)||₹32|
|Invocation of pledge||₹20|
*Charges applicable across brokers
If the pledged value of the securities in the demat account is ₹5,00,000, then as per RBI’s guidelines, the maximum loan that can be disbursed is ₹2,50,000.
Value refers to the value of the securities held in the demat account, which is ₹5,00,000, and loan refers to the amount of loan disbursed, which is ₹2,50,000.
The LTV ratio is -
= 2,50,000 / 5,00,000
The LTV ratio also tends to rise when there are outstanding interest and penalty charges, The LTV ratio can be determined using the following formula after the loan has been disbursed:
LTV = (Pending principal amount + Outstanding interest + Penalty charges) / Market value of the pledged securities.
To illustrate, let's assume the value of the security has fallen to ₹4,50,000, and there is an outstanding interest of ₹1,000 along with a penalty of ₹50. The new LTV ratio is calculated as follows:
The LTV ratio will be -
= (2,50,000 + 1,000 + 50) / 4,50,000
As per the RBI regulations, the borrower is expected to maintain a 50% LTV during the loan tenure.
Yes, the LTV is variable in nature as the value of the securities fluctuates. LTV is calculated each day after the markets close at 4 P.M.
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
LTV decreases when the value of the securities increases. For example, assume the value of the securities increases to ₹5,50,000. The new LTV ratio is –
2,50,000 / 5,50,000
LTV is variable in nature as the value of the securities fluctuates. LTV can go above 50% or below 50%. To bring back the LTV to 50%, either more securities must be pledged or the principal amount must be paid back 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.
RBI mandates 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, the timelines mentioned below must be kept in mind. To bring back the LTV to 50%, either pledge additional securities or repay part of the principal outstanding 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 up to 60%||Notice day plus 7 days|
|LTV higher than 60%||On the notice day by 7 PM|
Yes, in case the LTV goes higher than the required threshold of 50%, Zerodha Capital will notify clients via emails and automated voice blasts. Clients are requested to either pledge additional securities (to the extent of the shortfall) or repay part of the principal outstanding to get the LTV below 50%.
To pledge additional securities, visit the loans dashboard and pledge additional securities to maintain the LTV position. The top-up loan feature on the dashboard must be used to pledge additional securities.
Ensure to click on the check-box: Disbursement not required to ensure that no disbursement of funds happens and only securities are pledged to enhance the LTV ratio.
Confiscation, in the context of Loan against Securities, is the movement of clients' pledged securities from the client's demat account to the NBFC’s demat. A confiscation is triggered when the securities value drops below 50% haircut, creating a Loan to value (LTV) shortfall. The client can pledge additional securities or repay part of the loan amount to bring down the LTV below 50%. In the event the client does not do either, a confiscation is triggered as explained here.
The NBFC will be forced to invoke the pledge and liquidate the securities (partly or fully) to make good for the shortfall in LTV. Confiscation charges as per the charge list will be applicable if the NBFC is forced to invoke the pledge.
A flat annualised interest rate of 10.5% per annum is charged. The interest rate is subject to change depending on the prevailing economic situation.(Interest rate will be 11.5% effective from 1st Jan 2024)
LAS requires the client to service just the interest rate applicable on a monthly basis. The concept of EMI is not applicable to LAS. For example, if ₹2,50,000 is borrowed at an interest rate of 10.5% per annum, then the daily interest rate is –
10.5% / 365
The daily interest amount is –
0.0287% * 2,50,000
So for a month with 30 days, the interest amount applicable is –
71.91 * 30
If an interest repayment is not made or if it is partially paid, a penalty will be levied on the defaulted amount. The penalty is dependent on the penal charges.
A report is sent to Credit Information Companies (CICs) at the beginning of each month with the details of the interest payments made for the past month. If the interest repayment is not made or partially paid, the CICs will reduce the credit rating.
The minimum amount of loan is ₹25,000, and the maximum amount is restricted to ₹1 Crore. This maximum loan amount is cumulative across all loans you may have with Zerodha Capital Private Limited, including top-up loans, if any. The maximum loan that can be availed per day is ₹50 lakhs.
Yes, the loans can be foreclosed and pre-paid at any time. For example, if the loan amount is repaid within 2 months, the interest on the loan must be paid only for 2 months. See How to make interest repayments?
There are no charges for prepayment or foreclosure of the loan.
The due date to repay the monthly outstanding amount or interest is the 7th of every month. Penal charges will be charged if repayment is made after the 7th of each month.
Loans can be repaid by visiting the ‘Make re-payment’ tab on the loan dashboard. Upon clicking this tab, a pop-up is displayed where the clients must select the ‘Minimum or custom amount’ option and enter the amount they would like to pay. Repayment of loans can be made at any point in time.
Repayment towards the loan can be made through netbanking or UPI. Zerodha Capital does not accept repayments through credit cards, NEFT/RTGS, cash or cheques.
If a payment is not reflected on the statement even after 2 hours of making the payment, please share your debited bank account statement by creating a ticket, and our representative will assist you.
To close the loan visit the Close Loan tab on the loan dashboard. The total amount due including the principal and interest will be displayed. The loan will be closed once the total amount due is paid.
Zerodha Capital may need 3 working days to unpledge the securities after the total amount due is paid. Rest assured, Zerodha Capital will try to expedite this as much as possible.
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 and PFRDA. Clients who have completed their KYC with any financial institution would receive a CKYC number. This CKYC number is requested during the sign-up by Zerodha Capital.
It stands for Foreign Account Tax Compliance Act (FATCA). The Indian Government signed the Inter-Governmental Agreement (IGA) with the USA in 2015 to implement 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 to the Income tax department of India.
Three kinds of people may come under the definition of PEP:
PEPs are considered to be high risk customers for financial institutions 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 money laundering offences.
The approved list of securities can be found by visiting zerodhacapital.com/approved-list. RBI only permits a particular list of Group 1 securities to be allowed for collateralising for a loan by NBFCs. Zerodha Capital Private Limited 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.
All loans offered by Zerodha Capital are categorized as demand loans, requiring repayment within one year. Unlike traditional loans with fixed EMI structures, demand loans provide flexibility, allowing for the payment of only the minimum outstanding interest every month. Initially set for a one-year term, these loans can be renewed for an additional year if there is an outstanding balance.
The maximum tenure for LAS loans is limited to two years. Customers must repay the outstanding and close the loan within two years.
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 Private Limited 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 securities 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.
CKYC (Central KYC) is the central repository maintained by CERSAI. Any update in KYC that is made by the financial institution (such as Zerodha Capital Private Limited) and uploaded to CKYC takes up to 72 hours to be updated.
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.
Zerodha Capital Private Ltd.,
#153/154, 3rd Floor, 4th Cross Rd,
JP Nagar 4th Phase, Dollars colony
Zerodha Capital is the Non-Banking Financial Company (NBFC) arm of Zerodha. It offers loans against securities held in the demat account in a few simple steps that can be completed offline for non Zerodha demat accounts.
To avail a loan against securities, follow these steps:
Unpledging of securities:
There are mainly 3 documents that must be agreed upon to complete the loan application successfully:
No, taxation benefits with respect to the interest repaid on the loan with respect to LAS will not be received.
There will be no changes with respect to tax consideration for the shares provided as collateral for securing the loan. There would be a change of duration for calculating capital gains only if the shares unpledged and sold by the client, or if the shares are confiscated by Zerodha Capital.
No, LAS is available only for resident Indian individual account holders.
No, currently, LAS is not available for non-individual accounts.
No, currently, LAS is not available for joint account holders.
This nudge is shown when clients choose to take a loan by selecting to pledge only one security or only stocks when there are mutual funds available in the portfolio. It is always preferable to take a loan by pledging multiple securities along with mutual funds to reduce the chances of receiving LTV calls due to adverse volatility.
The confiscation of pledged shares by Zerodha Capital can occur under these scenarios:
It is important to note that the confiscation of pledged securities is a measure of last resort, and securities are confiscated only to the extent of outstanding interest. It is only initiated when the client fails to respond or take corrective action despite multiple reminders and notifications regarding the LTV breaches and non-payment of interest.
The closure and confiscation process for pledged securities when there is:
Zerodha Capital proactively communicates with clients through various emails and SMS notifications regarding the closure of loans. Confiscation of shares and loan closure is only initiated when the client fails to respond despite the outreach.
The interest rate for the loan is subject to periodic reviews, with adjustments made every three months based on dynamic factors such as the prevailing economic landscape, borrowing costs, market conditions, and the Central Bank's Monetary Policies. We ensure transparency in these adjustments, and provide clients with advance notices of any changes at least one month before implementation.
Please create a ticket here to contact support.