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What is Loan Against Securities (LAS)?

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.

What are the features of LAS?
  • Loan application process is completely online.
  • Minimum loan amount of ₹ 25,000.
  • Maximum loan amount of ₹ 1 Crore.
  • Max loan tenure of 1 year with an auto-renewal post 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 2 working days.
  • Flat annualised interest rate of 10.5% per annum for all Zerodha clients .
  • Single stock lending.
  • 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.

Whom should I pledge the securities to?

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).

What is the process of availing the loan?

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.
How much loan can be taken?

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.

What is the processing fee for availing a LAS at Zerodha Capital?

A flat fee of ₹436 must be paid during the online loan application process, irrespective of the loan amount. The breakup of ₹436 is as follows:

  • ₹200 for stamp duty charges as per the Department of Stamps and Registration, Government of Karnataka, for the loan application.
  • ₹200 + 18% GST (₹236) towards processing the loan application.
What are all the charges incurred while availing loan against securities?

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

Charges paid to Zerodha Capital Private Limited
Processing fee per loan ₹436
Confiscation charges 0.7% of the sell value
Interest rate (subject to change from time to time) 10.5% per annum
Penal Interest (subject to change from time to time) 18%

Charges paid to Zerodha Broking Limited*
Pledging (per security) ₹32
Unpledging (per security) ₹32
Invocation of pledge ₹20

*Charges applicable across brokers

How is the Loan To Value (LTV) ratio calculated?

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%

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

Can the LTV fluctuate?

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%

How to maintain the LTV below 50%?

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.

What happens if the Loan to Value (LTV) ratio exceeds 50%?

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
Will a notification be sent if the LTV ratio increases?

Yes, in case the LTV goes higher than the required threshold of 50%, Zerodha 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%.

How can additional securities be pledged to maintain the LTV?

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.

What happens if the LTV is not brought down?

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 of 0.7% of the sell value will be applicable if the NBFC is forced to invoke the pledge.

What is the interest rate for the loan?

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.

How is monthly interest computed for loan against security?

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
= 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 will happen if an interest repayment is not made?

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 interest rate.

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.

What are the minimum and maximum amounts of loan that can be availed?

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.

Can the loans be foreclosed, and are there any charges for foreclosure?

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.

What is the due date to repay the monthly interest due for the loan?

The due date to repay the monthly outstanding amount or interest is the 7th of every month. Penal interest will be charged if repayment is made after the 7th of each month.

How to repay the loan?

Loans can be repaid by visiting 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 ‘Minimun 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 does not accept repayments through credit cards, NEFT/RTGS, cash or cheques.

How to close the loan?

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 may need 3 working days to unpledge the securities after the total amount due is paid. Rest assured, Zerodha will try to expedite this as much as possible.

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 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.

What is FATCA?

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.

Who is a Politically Exposed Person (PEP)?

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.

Which securities can be pledged as collateral to avail a loan?

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.

Why is the tenure for LAS 1 year, and what does Auto Renewable mean?

All loans at Zerodha Capital are demand loans. Demand loans are short term loans which need to be repaid within 1 year. Demand loans need not be structured like loans with repayments structure as an EMI repayment

Therefore, demand loans are flexible where only minimum outstanding interest can be paid every month.

All loans at Zerodha Capital have a tenure of 12 months, after which the unpaid amount would automatically renew as a new loan, and 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 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 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.

Why does the KYC take up to 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 Capital Private Limited) and uploaded to CKYC takes up to 72 hours to be updated.

How to avail a LAS if a Zerodha demat account is not held?

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., #153/154, 4th Cross Rd, JP Nagar 4th Phase, Dollars Colony, Bengaluru - 560078

What terms and documents must be agreed upon for availing a LAS?

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.
Will taxation benefits be received by repaying the interest on LAS?

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

Will pledging shares remove them from being considered as long term holdings, and will long or short term capital gains be applicable on pledged shares?

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.

Can NRIs avail loan from Zerodha Capital Private Limited?

No, LAS is available only for resident Indian individual account holders.

Can a HUF or private company avail a loan from Zerodha Capital Private Limited?

No, currently, LAS is not available for non-individual accounts.

Can joint account holders avail a loan from Zerodha Capital Private Limited?

No, currently, LAS is not available for joint account holders.

Can a share purchased yesterday or in T1 quantity be used for obtaining LAS?

No, the shares have to be settled to the demat account for availing a LAS. The shares are credited to the demat account on a T+2 basis.

Still have queries?

Please create a ticket here to contact support.