FAQs: Loan against shares & mutual funds

Loan against securities can be availed online in a few minutes by following these steps:

• Visit zerodhacapital.com.
• Click Sign Up, and continue.
• You will receive a unique Zerodha Capital Client ID on your email, this will be your login ID to login to zerodhacapital.com dashboard once the loan is activated.
• Follow the on-screen steps and complete your initial KYC.
• Select the securities you want to pledge.
• E-sign the loan documents.
• Authorise the pledging of your securities via OTP.
• Complete your Video KYC.
• Wait for the funds to be credited to your bank account.

Note:

• Once your loan application is completed successfully, you will see a message stating, “Loan request initiated”. This confirms that your request has been submitted, and the loan amount will be credited to your bank account within one working day.
• Keep your Aadhaar and PAN handy during the process so you can enter OTPs quickly and avoid any screen time-outs.

To pledge additional securities, follow these steps on the Zerodha Capital loan dashboard:

1. Visit zerodhacapital.com and log in to your account.
2. Navigate to the Dashboard page.
3. Select the securities you wish to pledge.
4. E-sign the document.
5. Confirm the e-pledge request.
6. Select “I do not want disbursement in my bank account.”

This will ensure the securities are pledged only to maintain your LTV, and no loan amount will be credited to your bank account.

Confiscation refers to the transfer of a client’s pledged securities from their demat account to the NBFC’s demat account in order to recover outstanding dues under a Loan Against Securities (LAS) facility.

Confiscation may be triggered in the following situations:

1. LTV remains above the permitted limit (50%) for 6 consecutive days. To avoid this, repay part of the loan or pledge additional approved securities to bring the LTV within the permitted limit.
2. Interest remains unpaid for 3 consecutive months.
3. LTV exceeds 60% even for a single day.
4. The loan tenure has ended and the outstanding loan amount is not repaid by the due date.

Once confiscation is triggered, the pledged securities may be transferred and sold to recover the outstanding loan balance or any shortfall.

To understand how securities are selected during this process, refer to How are securities selected during confiscation?

If the LTV ratio is not brought back within the permitted limit, the NBFC may invoke the pledge and sell the pledged securities (partly or fully) to recover the shortfall.

This process is carried out to ensure that the outstanding loan amount remains within the permitted LTV limit.

If the NBFC is forced to invoke the pledge, confiscation charges may apply as per the applicable charges list.

If the monthly interest payment is not made or is only partially paid, penal charges will be applied on the overdue amount as per the applicable penal interest rate (18% + GST per annum).

Interest payments must be made between the 1st and 7th of every month through the Zerodha Capital dashboard. Delays beyond this period will lead to the penal charges being levied.

Zerodha Capital also reports repayment behaviour to Credit Information Companies (CICs) on a fortnightly basis. If interest payments are missed or delayed, it may negatively impact the borrower’s credit score.

If you want to keep your loan active so that you can apply for a top-up loan later, you need to maintain a minimum outstanding balance of ₹150. This small amount helps generate a nominal interest, which keeps your loan account active.

You cannot keep a balance lower than ₹150. If the balance is too low, the interest amount becomes very small, sometimes just a few paise, and it cannot be paid. This may lead to interest defaults, which can affect your credit score and repayment history.

Ideally, once you have repaid almost the entire loan, you should close the loan instead of keeping a very small balance. However, if you plan to take a top-up loan in the future, keeping ₹150 outstanding is enough to keep the loan active.

Please note that the loan tenure is 3 years, and you cannot keep the ₹150 balance beyond this period. After the tenure ends, you must close the loan and apply for a new one if needed.

Once you finish the process of applying for the loan, you will receive the Master Loan Agreement (MLA) on your registered email address. This email is sent by Digio, our onboarding partner.

When you repay a loan, there are multiple components that are being repaid. The advantage of loan against securities (LAS) is you can pay the principal back at any point during the loan, but only the interest has to be compulsorily paid every month.

Any amount exceeding the interest amount during the repayment will be made good for the principal amount borrowed. If you don’t pay the interest, there is a penalty involved.

How is the repayment divided into principal, interest, and penalty? First, the interest payment is considered, and then the principal. If there is a penalty, then the penalty is considered the first part of the repayment, then the interest is considered, and the principal at the end.

A little tricky to understand? Let’s take examples to break this down:

1. You have taken a loan of ₹1,20,000. The interest rate is 11% per annum. Refer the interest rate slabs for applicable interest rates. In this case, you’ll have to pay at least ₹1,150 (the interest) every month. You decide to pay ₹20,000 to make good for the principal borrowed as well. In this case:
   ₹1,150 is first deducted out of ₹20,000, and then the rest is considered as principal.

   1.	Interest	1,150
   2.	Principal	18,850
   	Total	20,000

2. You missed a loan repayment for a month, and there is a penalty of 18%. The interest payment for your loans is due on the 7th of every month. The penalty is calculated at 18% of the interest per annum divided by the number of days the interest payment has been pending for. If we take the same example:
   

   Let’s consider you missed the interest payment for 20 days, and made a repayment after 20 days. The calculation for this will be as follows:

   Penalty is ₹11.34 in this case. Calculation is 1,150 * 18% divided by 365 (days) * 20 (days).

   If you make the same repayment of ₹20,000 now, then the calculation is:

   1.	Penalty	11.34
   2.	Interest	1,150
   3.	Principal	18,838.66
   	Total	20,000

Note: If there is any shortfall because of the LTV (loan-to-value), the repayment will first consider the shortfall, and then the interest.

The minimum loan amount that can be borrowed is ₹25,000, and the maximum loan amount that can be availed is ₹10 crore.

For a top-up loan the minimum loan amount is ₹2500

The ₹10 crore limit includes both the initial loan amount and any top-up loans taken under the same active loan account.

You can pledge up to 50 different securities (scrips) at a time to avail a LAS at Zerodha Capital

A scrip refers to shares or securities of a single company. For example, shares of Company A, Company B, and Company C are considered three separate scrips.

If you wish to pledge more than 50 scrips, you can do so after one working day, once the initial pledge request is processed. After that, you can pledge additional securities to increase your loan amount.

Note: Pledge charges are levied by CDSL, which are ₹32 per pledged security + 18% GST. These charges are applicable each time a security is pledged and unpledged

Yes, the loan can be prepaid or foreclosed at any time.

Interest is charged only for the period the loan remains outstanding. For example, if the loan is repaid within 2 months, interest will be charged only for those 2 months.

There are no charges for prepayment or foreclosure of the loan.

Interest payments for your loan are due on the 7th of every month.

If the interest is not paid by the due date, a penal charge of 18% per annum is applied on the overdue interest amount, calculated for the number of days the payment is delayed.

Example:

1. Interest due: ₹1,000
2. Due date: 7th February
3. Payment made on: 11th February

The delay is 3 days (8th, 9th, and 10th February).

Penalty calculation:
₹1,000 × 18% × (3 ÷ 365) = ₹1.48

So, the penalty charged would be approximately ₹1.48 for the delayed payment.

You can repay your loan by following the steps mentioned below: 

1. Log in to your loan dashboard at zerodhacapital.com.
2. Click on “Make Repayment.”
3. Select “Minimum amount” or “Custom amount.”
4. Enter the amount you wish to repay and complete the payment.

Loan repayments can be made at any time.

Repayments can be done using UPI or netbanking. Zerodha Capital does not accept repayments through credit cards, NEFT/RTGS, cash, or cheques or bank accounts that do not belong to you.

If a payment is not reflected in your loan statement within 2 hours, please email your bank account statement showing the debited transaction to [email protected].

Our support team will verify the payment and assist you further.

To close your loan:

1. Log in to your Zerodhacapital.com, your loan dashboard.
2. Click on the “Close Loan” option.
3. The total amount due (principal + interest) will be displayed.
4. Pay the full outstanding amount to complete the loan closure.

Once the payment is made, Zerodha Capital will process your loan closure. After processing, the pledged shares are unpledged and credited back to your demat account within 2 working days.

Once you place a loan closure request, the request is usually processed by the end of the same day.

After processing, the pledged shares are unpledged and credited back to your demat account within 2 working days.

CKYC (Central Know Your Customer) is a centralized KYC database maintained by CERSAI. Financial institutions regulated by SEBI, RBI, IRDAI, and PFRDA upload customer KYC details to this repository.

If you have completed KYC with any financial institution, you will be assigned a CKYC number.

During the Zerodha Capital loan sign-up process, you may be asked to provide your CKYC number so that your KYC details can be verified.

If you have closed the loan yourself, you can apply for a new loan after a cooling period of 3 days.

However, if the loan was foreclosed due to default, you can apply for a new loan only after 90 days from the date of foreclosure.

This 90-day restriction applies in the following situations:

1. Non-payment of interest for 3 consecutive months
2. Foreclosure through confiscation of securities due to loan tenure expiry.
3. Foreclosure through confiscation of securities when the borrower is unable to repay the loan.

After the applicable waiting period, you can apply for a fresh loan through the Zerodha Capital dashboard. The waiting period at Zerodha Capital is 90 days.

Your sanction limit is the maximum loan amount you are eligible to borrow based on the value of your pledged securities.

As per Zerodha Capital’s internal policy, a new sanction limit cannot be created during the last 6 months of the 3-year loan tenure.

This means that after 30 months, you cannot increase your sanction limit or take a loan beyond the existing limit. However, you can still avail a top-up loan within your current sanction limit.

FATCA (Foreign Account Tax Compliance Act) is a US law that aims to prevent tax evasion by US taxpayers holding financial assets outside the United States.

To implement FATCA, the Indian Government signed an Inter-Governmental Agreement (IGA) with the United States in 2015. Under this agreement, financial institutions in India are required to collect and report certain financial account information of US taxpayers.

This information is shared with the Indian Income Tax Department, which may further exchange it with the US Internal Revenue Service (IRS) to ensure tax compliance.

A Politically Exposed Person (PEP) is someone who holds or has held a prominent public position and may therefore be exposed to higher risks of corruption or misuse of public funds.

The following individuals are generally classified as PEPs: Political figures: Senior officials in the executive, legislative, administrative, military, or judicial branches of government.

Immediate family members of political figures: This typically includes parents, siblings, spouses, children, and in-laws.

Close associates of political figures: Individuals who are closely connected to a political figure or may conduct financial transactions on their behalf.

Financial institutions classify PEPs as higher-risk customers and may apply additional due diligence checks to comply with regulatory requirements.

CKYC (Central Know Your Customer) is a centralized KYC repository maintained by CERSAI.

Any KYC updates made by a financial institution (such as Zerodha Capital) are uploaded to CKYC, and it may take up to 72 hours for these changes to be reflected in the system.

If you do not hold a Zerodha demat account and wish to avail a Loan Against Securities (LAS) using securities held with another broker, you will need to visit the Zerodha Capital office in Bangalore to complete the documentation and eligibility process.

Office address:
Zerodha Capital Private Ltd.,
CIN: U67100KA2014PTC073653,

To complete your loan application, you need to agree to the following three documents:

1. Term Sheet: A summary of the loan terms, conditions, and policies, along with details of the securities pledged for the loan.
2. Master Loan Agreement: A detailed legal agreement between you and Zerodha Capital that outlines all terms, conditions, and obligations related to the loan and any future disbursements under the same loan.
3. E-Pledge consent: An OTP-based authorization provided through CDSL, which allows you to pledge your securities and enable loan processing against them.

Yes, you can avail a top-up loan, which allows you to borrow additional funds on your existing loan without applying for a new loan.

The loan tenure does not change when you take a top-up. The maximum tenure remains 3 years from the date of the initial loan.

Example

If your loan started on 1st September 2025 and you take a top-up on 1st March 2026, your loan will still end on 31st August 2028.

The minimum disbursal amount for a top-up loan is ₹2,500.

Charges and conditions

1. A processing fee of 0.25% + GST or  ₹25,000 (whichever is lower ) on the loan amount is applicable on top-up loans.
2. Top-up loans cannot be availed within 90 days of loan maturity.
3. If your top-up request exceeds your sanctioned limit, a processing fee plus stamp duty of ₹500 will be charged.

No, pledging shares does not change their tax treatment. Your shares will continue to be considered for long-term or short-term capital gains based on the original purchase date.

There is no impact on capital gains tax as long as the shares remain pledged.

Tax implications will arise only when:

1. You unpledge and sell the shares, or
2. The shares are sold (for example, during confiscation to recover dues)

In such cases, capital gains will be calculated based on the holding period, as per applicable tax rules.

This nudge appears when you select only one security or only stocks, even though you have mutual funds available in your portfolio.

Pledging a mix of multiple securities (stocks and mutual funds) helps reduce risk. It makes your portfolio more diversified and lowers the chances of your LTV increasing due to market volatility in a single stock.

This is why the platform suggests selecting multiple securities or including mutual funds when taking a loan.

Zerodha Capital may confiscate pledged securities (as a last resort) if the loan conditions are not met.

This can happen in the following situations:

• LTV remains above the permitted limit (50%) for 7 (Notice plus 6 days) consecutive days and no action is taken to reduce it
• LTV reaches 60% or higher, in which case action may be taken immediately
• Interest is not paid for 90 consecutive days
• Loan must be closed before the loan tenure ends.

To avoid this, you can:

• Pledge additional securities, or
• Repay part of the loan

Confiscation is initiated only after multiple reminders and notifications, and securities are typically sold only to the extent required to recover the outstanding dues.

Zerodha Capital may initiate loan closure and confiscation of pledged securities in the following situations:

1. Non-Payment of Interest for 90 days:
   If the interest remains unpaid for 90 consecutive days, the pledged securities may be confiscated and sold, and the loan will be closed.
2. Loan not repaid within 3 years (36 months):
   If the loan is not fully repaid within the maximum tenure of 3 years, the loan will be closed, and the pledged securities may be confiscated to recover dues.

In both cases, the securities are sold only to the extent required to recover the outstanding principal and interest. Any excess amount is credited back to the client’s bank account.

Zerodha Capital will notify clients through emails, SMS and voice blast before initiating this process. Confiscation is carried out only if no corrective action is taken despite multiple reminders.

If a company whose shares you have pledged with Zerodha Capital undergoes a merger or amalgamation, you will be required to either replace those shares with another security from the approved list or make a partial repayment on your loan. This ensures that your Loan-to-Value (LTV) remains within permissible limits and helps avoid any potential action.

Zerodha Capital notifies the customer in advance of the record date for the merger or amalgamation to have sufficient time to act. If no action is taken, Zerodha Capital may be compelled to invoke the pledge and sell the pledged securities (fully or partially) two trading days before the Ex-date to cover any LTV shortfall.

Example:
If company ABC merges with XYZ, the shares of ABC will be extinguished after the merger. Equivalent XYZ shares are generally credited to the demat account 30 to 45 days after the record date. The new shares will only appear in the portfolio once they are officially listed on the stock exchange.

Days Past Due (DPD) refers to the number of days a payment is overdue after its due date.

Example scenario

• Your interest payment is due on the 7th of the month
• If the payment is not made, the account becomes overdue from the 8th
• On the 8th, it is considered 1 day overdue (1 DPD)

An account with 1 DPD is typically classified as a Special Mention Account (SMA-0).

Note: DPD helps track how delayed a payment is and is used by lenders to monitor repayment behaviour.

A Special Mention Account (SMA) is a loan account where payments are overdue, but the loan has not yet become a Non-Performing Asset (NPA).

Accounts are classified into categories based on how many days the payment is overdue:

• SMA-0: Overdue for up to 30 days
• SMA-1: Overdue for 31 to 60 days
• SMA-2: Overdue for 61 to 90 days

If the payment remains unpaid for more than 90 days, the loan is classified as an NPA.

Example

Payment due date: 7th May

• 8th May: 1 day overdue → SMA-0
• After 30 days overdue → SMA-1
• After 60 days overdue → SMA-2
• After 90 days overdue → NPA

Note: SMA classification helps lenders track delays early and take necessary action before the loan turns into an NPA.

A Non-Performing Asset (NPA) is a loan where the payment has been overdue for more than 90 days.
If dues are not paid for 90 days from the due date, the loan is classified as an NPA.

Example

• Payment due date: 7th May 2024
• If unpaid, the loan becomes an NPA after 90 days, i.e., on 6th August 2024

Note: NPA classification indicates that the loan is seriously overdue and may lead to further recovery actions.