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.

• Loan application process is completely online.
• Minimum loan amount of ₹ 25,000.
• Minimum top-up loan amount of ₹10,000.
• Maximum loan amount of ₹ 1 Crore.
• Loan tenure of 1 year.
• 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 1 working day.
• Flat annualised interest rate of 11.5% per annum for all Zerodha Capital clients.
• Large list of approved stocks.
• Amongst the lowest processing fee in the industry.
• No hidden charges.
• Dashboard for easy loan management.
• Easy top-up loan process.
• A haircut of 55% to avoid constant notifications.

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:

• Onboard with Zerodha Capital Private Limited as a customer.
• Enter the amount of loan required.
• Select the securities that need to be pledged.
• E-Sign the loan documents.
• Create a pledge via OTP.
• Wait for the money to be credited to the bank account.

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.

Loan disbursement is typically completed within one business day, provided there are no issues with your application.

Note: If you pledge your shares on a weekend or a market holiday, please note that while the shares will be pledged on the same day, the disbursement will be processed on the next working day. Check out the market holiday calendar here.

The processing fee for availing a loan at Zerodha Capital is 0.25% of the disbursed loan amount along with GST plus a stamp duty of Rs.500. This is non-refundable and is deducted from your disbursed loan amount automatically before you receive the loan in your bank. For example,

You have availed a loan worth ₹1,00,000. The total processing fee for this would as follows:

Note:

• ₹500 is charged for stamp duty charges as per the Department of Stamps and Registration, Government of Karnataka, for the loan agreement.
• The processing fee is deducted for all loan disbursements including new loans, top-up loans, additional disbursements, etc.

The list of charges (non-refundable) are as follows:

*Penal charges are levied only when there is a default in the payment of monthly interest.
**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
= 50%

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
= 55.78%

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
= 55%

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
= 45.45%

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.

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.

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’ Loan to value (LTV) increases above 50% for 6 consecutive days. You can pledge additional securities or repay part of the loan amount to bring down the LTV below 50%. In the event that you do not do either, a confiscation is triggered.
• There is an interest default for 3 months.
• The LTV increases above 60% for 1 day.
• The loan tenure has ended and you fail to repay the loan by the end of the tenure.

Once a confiscation is triggered, the securities that are confiscated will be sold, and Zerodha Capital recovers the loan.

How are the securities sold during confiscation?

If you have pledged shares for a loan against securities, then, during a confiscation, it is sold based on liquidity of the security on that day. The most liquid security on that trading day in the market will be first confiscated.

For example, you hold securities of company A, B and C, and there is a confiscation. As on the day the shares are being confiscated, A is the most liquid stock, and is easily recoverable. B is the second most liquid stock, and then shares of company C are the least liquid. In this case, shares of company A will be confiscated first, and then B, and so on.

If you only hold mutual funds, then, the mutual fund which has the highest AUM in your portfolio gets confiscated first.

Note: This is an automated process, and the backend system sells the securities based on this logic.

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 11.5% per annum is charged. The interest rate is subject to change depending on the prevailing economic situation.

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 11.5% per annum, then the daily interest rate is –

11.5% / 365
= 0.0315%

The daily interest amount is –

0.0315% * 2,50,000
= ₹78.75/-

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

78.75 * 30
= ₹2,362.5

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.

Once you finish the process of applying for the loan, you will receive the Master Loan Agreement (MLA) on your registered email address within 1 working day. 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 Rs.1,20,000. The interest rate is 11.5% per annum. In this case, you’ll have to pay at least Rs.1,150 (the interest) every month. You decide to pay Rs.20,000 to make good for the principal borrowed as well. In this case:
   Rs.1,150 is first deducted out of Rs.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 Rs.11.34 in this case. Calculation is 1,150 * 18% divided by 365 (days) * 20 (days).

   If you make the same repayment of Rs.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 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.

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.

For example, the interest for your loan is due on the 7th of February of Rs.1000. You miss the payment on the 7th of February. If you pay the interest on the 11th of February instead, the calculation of penalty is simple. It is 18% of Rs.1000 divided by 3 days (8th, 9th and 10th).

1000 * 18/100 * 3/365 = 1.479 Rs.

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.

Demand and call loans are types of short-term loans that can be asked to be repaid at any time by the lender. They are often used to meet immediate or short-term financial needs, with no fixed repayment schedule.

How do they work?
An NBFC (Non-Banking Financial Company) provides the loan without a fixed repayment schedule. Only the interest on the outstanding loan amount has to be paid every month.

What are the main features of Demand and Call Loans?

• Flexible Repayment: No fixed repayment schedule; repayable whenever the lender demands.
• Short-term Use: Primarily used for short-term financial needs.
• Quick Access to Funds: Fast approval and disbursement, useful for urgent financial needs.

Three kinds of people 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 a 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 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.

The maximum tenure for LAS loans is limited to 1 year. Customers must repay the outstanding and close the loan within 12 months.

Yes, there will be a grace period of 30 days after the end of your loan tenure of 12 months. If the loan has not been repaid by the end of the grace period, the securities will be confiscated.

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

The Sanction Limit provided to customers of Zerodha Capital Private Limited is 1 time of the pledged holding value or ₹1,00,000, whichever is higher. The maximum sanction limit for a customer is ₹1 Crore.

If you take multiple top-up loans and exceed the sanction limit, a new loan agreement will be made, meaning that this is a new loan on top of the existing loan that you have.

A little complicated? Let’s take an example to understand this better.

Note: Loan disbursement within the sanction limit and any increase in the sanction limit depends on your credit and risk profile, which are assessed periodically.

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.

Office address:
Zerodha Capital Private Ltd.,
#175/176, 2nd Floor
Bannerghatta Main Road,
next to Rainbow Hospital,
Bilekahalli, Bengaluru - 560078
Karnataka

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:

1. Onboard with Zerodha Capital Private Limited as a customer by filling out the application form.
2. Download, print, and fill out the pledge request form from your depository participant (DP). Ensure to enter the pledgor and pledgee (Zerodha Capital Private Limited) demat account details, ISIN with quantity, expiry date, agreement number, and signature.
3. In this context, the financial entity (Zerodha Capital Private Limited) will be the pledgee, and the person applying for the loan will be the pledgor.
4. Submit the acknowledgment copy that is received from your DP after setting up the pledge by visiting the following address.
   
   Zerodha Capital Private Ltd.,
   #175/176, 2nd Floor Bannerghatta Main Road,
   next to Rainbow Hospital,
   Bilekahalli, Bengaluru - 560078
   Karnataka
   
   
5. Sign the master loan agreement and the term sheet at Zerodha Capital's office.
6. The loan will be processed within 48 hours.

Unpledging of securities:

1. The outstanding amount, including principal, interest, and any other charges, needs to be paid to clear all outstanding dues.
2. Zerodha Capital will then issue an instruction to Zerodha DP to unpledge the shares.
3. Zerodha Capital Private Limited may need 3 working days to process the unpledging of shares.
4. The loan closure confirmation email will be sent after the due process is complete.

There are mainly 3 documents that must be agreed upon to complete the loan application successfully:

• Term Sheet: A Term Sheet is an acknowledgement provided by the client for understanding all the terms, policies, and 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 the client and Zerodha Capital Private Limited, 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., Central Depository Services (India) Limited (CDSL). It is an OTP based mechanism that allows the client to pledge their stocks with Zerodha Capital Private Limited and process a loan based on such pledged stocks.

No, taxation benefits with respect to the interest repaid on the loan with respect to LAS will not be received.

Yes, you can avail a top-up loan. A top-up loan is an additional loan amount that can be borrowed on an existing loan allowing borrowers to access extra funds without needing to apply for a separate loan.

The loan tenure does not increase when you take a top-up loan. The maximum loan tenure is 1 year. If you take a top-up loan in between the year, you will have to repay the loan within the same tenure of the initial loan.

For example, If you have applied for a new loan on January 1st, and then for a top-up loan on March 1st, the loan tenure ends on the 31st of December itself.

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

Note:

• Processing fee of 0.25% + GST will be charged for availing a top-up loan.
• Top-up loans cannot be taken in the last month of the loan tenure.

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:

• Increased LTV above 50% for Seven Consecutive Days: If the Loan-to-Value ratio for your pledged shares remains elevated for seven consecutive days, and you do not bring in the funds to reduce the LTV, Zerodha Capital may invoke the pledge and confiscate the shares. In this situation, you can pledge additional securities to bring down the LTV.
• LTV Reaches 60% or Higher: Zerodha Capital may immediately confiscate the securities on the same day if the LTV ratio of the pledged securities reaches or exceeds 60%. 60% LTV ratio is considered a threshold, triggering the confiscation of securities.
• Non-Payment of Interest for 90 Consecutive Days.

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:

• Non-Payment of Interest for 90 days: When the interest amount remains unpaid for the last 90 days, the pledged securities are confiscated, and the loan is closed. The confiscated securities cover only the extent of the outstanding interest plus the principal amount, and any surplus is credited to the client’s bank account.
• Non-Repayment of Loan within 12 Months (1 Year): If the client does not repay the loan within 12 months or one year from the loan's initiation, the loan is closed, and the pledged securities are confiscated. These confiscated securities are utilized to settle the outstanding amount, and any excess funds are returned to the client’s bank account.

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.

Customers who have pledged their stocks to avail a loan will continue to qualify for benefits from corporate actions. To stay informed about all ongoing and forthcoming corporate actions, you can refer to this list (DOC).

MCLR (Marginal Cost of Funds Based Lending Rate) is the minimum interest rate at which a bank can lend. It was introduced by the Reserve Bank of India (RBI) in 2016 to replace the older base rate system. The MCLR system aims to improve the transmission of monetary policy rates to the financial market, ensuring that banks pass on the benefit of reduced interest rates to their customers.

Please create a ticket here to contact support.