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Loan Against Mutual Funds (LAMF) is a credit solution through which borrowers can obtain funds by putting mutual funds as a security. This approach of pledging mutual funds is specifically relevant for investors who require immediate liquidity but don’t want to sell their investments.

For instance, in case you built a great portfolio of Mutual Funds (MF) as a long-term investments, and these are giving you good returns as well. However, you suddenly came across a situation where you need immediate short-term funds for your business. But, you do not want to sell your investments. Here, in this situation, a feasible option to opt for is to obtain Loan against Mutual Funds. This is how you can take your of both- your short-term money needs and at the same time earn returns from your MF portfolio without selling them.

On that note, let’s explore more about the meaning of a Loan against Mutual Funds, its advantages, the list of different banks providing LAMF and interest rates.

List of banks that provide loans against mutual fund service.

State Bank of India (SBI):

SBI offer loans against mutual funds with a minimum loan amount of ₹25000 and the maximum amount being:

  • Equity/ Hybrid/ ETF MF : Rs 20,00,000
  • Debt/ FMP MF : Rs 5,00,00,000

Interest rate

Scheme 1- year MCLR Spread over 1 year MCLR Effective interest rate
Loan against Mutual Fund 8.55% 2.50% 11.05%

Eligibility

  • Individual must be over the age of 18
  • All SBI branches are eligible

Documentation

Here are the list of documents required to apply for SBI Loan against MF:

  • Latest monthly salary slip showing deductions – of self and co-applicant.
  • Latest Form 16 from employer (for employees) – of self and co-applicant.
  • Copy of IT return for last two years, duly acknowledged by ITO with computation of income, for others.
  • Copy of passport/ voters ID Card/ driving licence for proof of Identity.
  • Copy of electricity bill/telephone bill/passport/voters I-card for proof of residence.
  • Latest passport size photograph – of self and co-applicant.
  • Last six months bank statement of the account where salary is credited of self and co-applicant.
  • Proof of official address (in case employees are applying).

Also read: SBI business loans: Eligibility, interest rate and process of application

ICICI Bank:

ICICI Bank also offers Loan Against Mutual Funds, where people can apply for this at their branches or via the online application form. The loan amount can be upto:

  • 50% of the Net Asset Value (NAV) in case of equity mutual funds
  • 80% in case of debt mutual funds

Apart from this, this facility can be availed only against the list of mutual funds approved by ICICI Bank and the ones registered with CAMS

Business Loan

Eligibility

The eligibility criteria for the ICICI Insta Loan Against Mutual Funds are as follows:

  • LAMF is open to pre-qualified individual customers only.
  • The applicant should have an existing savings account with the bank.
  • They must maintain a portfolio with mustual funds registered with CAMS.

Interest rate:

Scheme Effective interest rate (p.a.)
Equity mutual funds 9.90%
Debt mutual funds 9.40%

Note: The interest rates for the Loan Against Mutual Funds are subject to change and are based on the prevailing market conditions.

Online application process:

  • Log in to ICICI Bank Internet Banking official website
  • Go to ‘Investments & Insurance’ and click on “LAMF” option
  • Select the type of mutual fund you want to register with
  • Approve the request in the CAMS portal for OTP verification
  • Read and accept the Insta credit terms carefully
  • Enter the received OTP to activate the LAMF account
  • Once the lien flag is approved, restrictions will be set on the loan amount of the OD
  • Start spending money

Also read: ICICI Bank business loan: Check loan types, eligibility criteria and interest rate

HDFC Bank:

Customers of HDFC Bank are also eligible for loans against mutual funds.

Interest rate :

HDFC SIP Plans with highest return in 2023

Product name 5 year return (%) Monthly SIP (₹)
HDFC Flexi Cap Fund (G) 17.7 ₹ 10,000
HDFC Infrastructure Fund (G) 17 ₹ 10,000
HDFC Balanced Advantage Fund (G) 16.6 ₹ 10,000
HDFC Focused 30 Fund (G) 16.5 ₹ 10,000

Limits on the Loan Against Mutual Funds
The minimum loan amount you can get against mutual funds is ₹1 lakh, while the maximum is ₹10 lakhs against equity funds and ₹1 crore against debt funds. So, you can apply for the LAMF as per your requirements withing these range. Apart from this, you can borrow up to half the value of your Mutual Funds portfolio.

Eligibility:

  • The applicant should be an Indian resident.
  • They should be a pre-approved HDFC Bank customer.
  • They must have an existing savings account with the bank.
  • They must maintain a portfolio with mustual funds registered with CAMS.

Online application process:

  • Open HDFC bank’s official website
  • Request Net Banking certificate
  • Click on the “Demat” button
  • Click Apply
  • Select “Credit Loan”
  • Log into your CAMS account in Net Banking
  • Select the investment fund
  • Receive a password to open the site.

Axis Bank:

Additionally, Axis Bank provides loans secured by securities, including mutual funds.

Interest rate:

Product Repo rate Effective interest rate
Loan against Securities 6.50 % 11.50% – 13.75%

Eligibility:

  • He/she must be an Indian resident.
  • They should be an individual within the age of 18 to 75 years.
  • They must have an existing savings account with the bank.
  • They must maintain a portfolio with mustual funds registered with CAMS.

Online application process

  • Log in to the Axis Bank Internet Banking using your credentials
  • Log in to the Axis Bank Internet Banking profile.
  • Once you log in, go to the ‘Explore Products’ tab.
  • Click on the ‘Loans’ option.
  • Click on the ‘Loan Against Securities’ option.
  • Enter details such as your name, mobile number, email address, residence address, etc.
  • Click on ‘Submit’ to get to the next stage where you’ll need to enter mutual fund details.
  • Submit the application after filling all the required details.

Also read: Axis Bank business loan: Eligibility, interest rates, how to apply

Kotak Mahindra Bank:

Kotak Mahindra Bank also offers loan against securities, that include Loan Against Mutual Funds. The loan amount can be up to 60% of the market value of your mutual fund units.

Interest rate:

9.00% p.a.

Eligibility:

  • They should be an Indian resident.
  • An individual within the age of 18 to 65 years.
  • They must have an existing savings account with the bank.
  • They must maintain a portfolio with mustual funds registered with CAMS.
  • NRI – Non-Resident Citizen – (for Equity and Payments MF Funds held in the name of the borrower) Non-personal entities like / Non-Commercial Companies / Commercial Bank / Limited Liability Company / HUF (for debentures)

Documentations:

  • Application for Securities Loan
  • Returns on personal income during the previous 2 years
  • Personal Certificate for the last 3 months
  • Product Master List (CML) Used by Persons belonging to the relevant Demat account (in case of stock)
  • Self-Certified Investment Fund Tables
  • Self-Certified Mutual Fund Tables

Things to know before you apply Loan Against Mutual Funds:

  • Ensure you meet the eligibility requirements specified by Kotak Mahindra Bank
  • Fill out all the required documents including KYC details, proof of address, proof of initial income and details of investment in shares.
  • Discuss the intention to apply for a loan with the bank relations manager.
  • Fill out the application form with the correct information. Please check all details carefully before shipping.
  • Submit all required documents with the application.
  • The bank will initiate a verification process to assess eligibility and the value of the investment funds.
  • After verification, the loan will be approved if it meets the company’s requirements.
  • After approval, the loan will be transferred to the bank account or the bank will give the loan.
  • Understand the repayment terms and make sure to comply with the agreed upon repayment schedule.

IndusInd Bank:

Additionally, IndusInd Bank offers lending options secured by securities, including mutual funds.

Interest rate :

Scheme 1- year MCLR Effective Interest Rate
Loan against Mutual Fund 8.55% 11.05%

Eligibility:

  • Individuals
  • Residents of India
  • Ages between 18 and 70 years
  • Possessors of approved documents
  • Non-citizens
  • Indian entities
  • Loan is only based on approved loan and contract

Documentation:

  • Personal application

-Loan agreement

-Documentation proving identity, your signature, and your address.

-Demat Account Statement or Holding Statement (MF)

-Enclosure with Mortgage Request Letter for Pledged Securities

-For loans above Rs.50 Cr, ITR (Calculated Income) for the last two years and our bank details for the months

  • Non-personal

-Application and loan agreement

-KYC information such as proof of identity, signature and address.

-Demat Statement of Account or Statement of Assets (MF)

-With Request for Securities Lien as per Board Decision

-Audited Balance Sheet, Profit and Loss Account, Bank Statements and Last Two Years of ITR Returns.

IDBI Bank:

The terms and circumstances of IDBI Bank’s loans against mutual funds are governed by the bank’s rules.

Interest rate:

Scheme 1- year MCLR Effective interest rate
Loan against Mutual Fund 8.55% 11.05%
Loan against SGB 8.55% 10.55%

Eligibility:

  1. Applicants may be individuals, professionals, sole proprietors, partnerships and private companies (including related companies).
  2. Applicants must be 18 years of age or older and 65 years of age at the time of the loan. If not individual, business has been running for at least 2 years, mutual funds (loan rate up to 50% of asset value), RBI Bonds, Life Insurance Policy, Savings Certificates and Kisan Vikas Patra

Documentation:

  1. A photograph of each applicant and partnership applicant, director and sponsor (in companies and trusts), partners (in partnerships) or authorized persons (in society).
  2. IT statements, verification of profit, loss, accounts and balance sheets for the last two years, six-month bank statements, business certificate, provisional certificate for the last year, various creditors and debtors
  3. Copies For the last 6 months Certified bank statements.
  4. Knows Customer (KYC) information for applicants.
  5. Deed of Partnership, Articles of Incorporation (MOA) and Articles of Association (AOA) or business certificate in accordance with each state’s market and district laws.

Online application process:

  • Log in to the IDBI Bank Internet Banking profile
  • Once you log in, go to the ‘Personal Banking’ tab
  • Click on the ‘Loans’ option
  • Click on the ‘Loan Against Securities’ option
  • Enter details such as your name, mobile number, email address, residence address, etc.
  • Click on ‘Submit’ to get to the next stage where you’ll need to enter mutual fund details
  • Click on ‘Submit’ after carefully filling all the required details

Charul Nalwaya

Charul is a content marketing professional and seasoned content writer who loves writing on various topics with 3 years of experience. At Tata nexarc, it has been 2 years since she is helping business to understand jargon better and deeper to make strategical decisions. While not writing, she loves listing pop music.