Nithin Kamath, founder of Zerodha, recently highlighted a key regulatory change by the RBI: the limit for banks to lend against shares (LAS) has been raised from ₹20 lakh to ₹1 crore per person. Kamath sees this as a welcome move that could make Loan Against Securities (LAS) far more popular in India. He pointed out a common financial mistake—many people with stock holdings continue using high-interest credit cards or personal loans when they could leverage their investments for credit at much lower rates, often below 10-15%.
Yet, Kamath notes, there’s a major awareness gap: most are simply unaware they can use LAS as a tool to save on borrowing costs and build a credit footprint.
One good change from RBI yesterday: banks can now lend up to ₹1 crore against shares, up from the earlier ₹20 lakhs. Hopefully, this makes loan against securities (LAS) more popular.
— Nithin Kamath (@Nithin0dha) October 2, 2025
It's ridiculous how many people holding stocks continue taking personal loans or using credit… pic.twitter.com/HqbmxTDX3x
How Does Loan Against Securities (LAS) Work?
A Loan Against Securities is a secured loan where individuals pledge eligible securities—such as shares, mutual funds, bonds, or insurance policies—as collateral with a bank or NBFC. The lender grants an overdraft facility or a term loan, with the amount typically up to 50-80% of the market value of the pledged assets (subject to RBI/SEBI regulations and lender policy). The borrower continues to own the securities and can benefit from dividends or bonus issues, but cannot sell or transfer them without repaying the loan.
- Interest is charged only on the utilized amount (if in overdraft format), not the sanctioned limit.
- Repayment is flexible, often interest-only with the principal payable at the end or in regular EMIs.
- Approval and disbursal are usually quick, especially if the lender already holds the securities in demat.
- Borrowers can get their collateral released/ownership restored on full repayment.
Benefits of LAS
- Lower Interest Rates: Much cheaper than unsecured options like credit cards (40%+) or personal loans (16–24%+). Typical LAS rates range from 8%–15%.
- No Need to Sell Investments: Retain potential upside in securities while accessing liquidity.
- Credit Building: Useful for those with thin credit files—regular repayments can help build a track record.
- Flexible Repayment: Customizable to borrower’s needs: overdraft, EMIs, bullet payments.
- Quick Access: Digital pledging by leading lenders enables disbursal often within 24-48 hours.
Risks and Disadvantages
- Market Risk: If pledged securities fall in value, the lender may ask for additional margin (top-up) or even force-sell part of the collateral.
- Limited LTV: Maximum available is up to 50% (for shares), 60–85% for MFs/bonds—so it’s not a 1:1 cash-out for the entire holding.
- Usage Restrictions: Funds can’t be used for speculative trading or investing in securities, as per RBI/SEBI rules.
- Foreclosure Risk: Delays in margin maintenance or repayment may trigger sale of pledged securities by the lender.
Read this: Kamath Listened to NRIs — Zerodha Now Lets NRIs Invest in India with Ease
Growth of LAS in India and New Startups
The RBI’s decision reflects the maturing and digitization of India’s capital markets. With more retail investors accumulating substantial stock portfolios, LAS is emerging as a preferred alternative to costly unsecured loans—especially as platforms like Zerodha and HDFC demystify and digitize the process.
Several startups and NBFCs are tapping into this segment:
- Zerodha Capital: Pioneering digital LAS, educating customers on lower-cost leverage.
- Groww, Upstox: Offering LAS for stocks and mutual funds, highlighting digital experience.
- Dedicated fintechs like RURASH, Anand Rathi, Tata Capital, and Bajaj Finance also provide tailored LAS products with transparent processing and flexible options.
- Banks: HDFC, ICICI, SBI, and Axis, among others, now feature one-click/online LAS.
With this regulatory push, the LAS market in India is likely to expand rapidly—helping millions better manage liquidity and avoid high-cost debt, while also promoting financial inclusion for new-to-credit borrowers.
In summary, RBI’s new LAS limits offer a modern, safer way for Indians to leverage their financial assets, reduce reliance on expensive debt, and manage liquidity with flexibility. As fintech adoption rises and awareness spreads, LAS could quickly become a mainstream credit tool for the growing investing class.
