Eligibility criteria for loan against Demat shares
Anyone can apply for our loan against shares online, as long as they meet the four basic criteria mentioned below.
Nationality: Indian
Age: 21 years to 90 years
Employment: Salaried, self-employed
Portfolio value: Minimum Rs. 50,000
If you have a Demat account and hold eligible securities, you can quickly access funds by pledging them.
Advantages of loan against Demat shares
Retain ownership: You can continue to own the shares, earning dividends and benefiting from capital appreciation.
Quick liquidity: It provides quick access to funds without the need to sell investments.
Lower interest rates: Since the loan is secured, interest rates are typically lower than unsecured loans.
No impact on shareholding: Your shareholding remains intact, allowing you to maintain long-term investment strategies.
Benefits of loan against demat shares
A loan against demat shares allows you to unlock the value of your existing shareholdings without selling them. It provides quick access to funds while keeping your investments intact, making it a flexible and cost-effective borrowing option.
Instant liquidity without selling shares: You can access urgent funds by pledging your demat shares instead of selling them in the market. This ensures you retain ownership and benefit from future price appreciation or dividends.
Lower interest rates compared to unsecured loans: Since the loan is backed by securities, lenders generally offer interest rates lower than those of personal loans or credit cards, reducing your overall borrowing cost significantly.
Flexible usage of funds: The loan amount can be used for multiple purposes ranging from business expansion and medical expenses to education or personal emergencies without any end-use restrictions from the lender.
Overdraft facility for better cash flow: Many lenders offer an overdraft option where interest is charged only on the amount you withdraw from the sanctioned limit, giving you greater control over interest outgo.
No impact on investment portfolio: Your shares continue to stay in your demat account, so you remain invested in the market and can benefit from long-term growth while meeting short-term liquidity needs.
Quick processing with minimal documentation: As your securities serve as collateral, lenders usually require fewer documents and offer faster approvals, making it ideal for urgent fund requirements.
Make your investments work twice as hard secure liquidity and stay invested. Apply now
Risks and considerations
Like every financial product, this loan comes with risks:
Market risk: If the value of your pledged shares declines, you may need to provide additional collateral or face forced liquidation since the loan is secured by shares as collateral with the lender entity.
Loan-to-value limitations: Lenders may only offer a loan amount based on a percentage of your share value,(which can be up to 50% or more than the value of your shares as per RBI guidelines), reducing the loan potential if stock prices drop.
Interest costs: You are required to pay interest on the loan, which can add up over time and reduce the financial benefit.
Risk of losing shares: Failure to repay the loan can result in the lender selling your pledged shares, causing a loss of ownership.
Tips to manage risk: Monitoring, alerts, portfolio safety
When you pledge demat shares for a loan, keeping track of your portfolio becomes essential. Active monitoring and smart precautions help you avoid margin calls, protect your holdings, and maintain financial stability throughout the loan tenure.
Monitor portfolio value regularly: Keep an eye on the market value of your pledged shares. Sudden price fluctuations may impact your loan-to-value ratio, so monitoring ensures you’re prepared for top-ups or margin requirements in advance.
Set up price alerts for key stocks: Use trading platforms or broker apps to set alerts on significant price movements. This way, you’ll receive instant notifications when your shares cross critical thresholds, helping you act quickly and avoid unnecessary risk.
Diversify pledged securities: Avoid pledging all your holdings in a single stock. By pledging a diversified portfolio of shares or funds, you reduce the impact of volatility in any one security and maintain safer coverage for your loan.
Maintain buffer margin with extra shares: Instead of pledging just enough to meet the loan requirement, keep a buffer by pledging additional shares. This cushion prevents forced selling if share values dip temporarily due to market volatility.
Review loan account statements frequently: Track loan statements and overdraft usage to ensure you are not over-leveraged. Regular reviews help you stay disciplined, avoid hidden charges, and plan repayments more effectively.
How to apply for a loan against Demat shares.
A loan against Demat shares allows you to access funds without selling your investments. Here's a simple step-by-step guide to help you through the application process:
Step 1: Choose a lender
Start by identifying a bank or financial institution that offers loans against securities. Compare their loan-to-value (LTV) ratios, interest rates, processing fees, and terms.
Step 2: Submit the application
You can apply online or at a branch, depending on the lender’s process. You’ll need to fill out a loan application form and specify the shares you intend to pledge from your Demat account.
Step 3: Provide the required documents
Along with the application, submit the following documents:
Proof of identity: Aadhaar card, PAN card, or passport
Proof of address: Utility bill, Aadhaar card, or passport
Demat account details: Client Master Report or latest Demat statement
Bank account details: Canceled cheque or bank statement
Income proof (if required): Salary slips or ITR (depending on the lender)
Step 4: Share the evaluation and loan sanction
The lender will assess the value of your pledged shares and determine the eligible loan amount based on their LTV ratio (usually 50–70%). Risk profile and market conditions may also influence the approved amount.
Step 5: Sign the agreement
Once your loan is sanctioned, you will be required to:
Step 6: Disbursement of funds
After the documentation and pledge setup are complete, the funds will be disbursed directly to your bank account.
Interest rates and charges
Interest Rate: 8% to 15% per annum
Processing Fee: Up to 4.72% of the loan amount
Prepayment Charges:
Annual Maintenance Charges: Up to 1.18% of the sanctioned loan amount
Bounce Charges: Rs. 1,200 per instance of dishonored payment instrument or missed installment.
When should you consider a loan against Demat shares?
This option works best when you:
Need quick funds but want to stay invested.
Have short-term requirements like medical costs, education, or business working capital.
Want a cheaper borrowing option compared to unsecured loans.
Prefer flexible use of funds without restrictions.
Difference between loan against shares and selling investments
Loan against shares: You retain ownership, continue to earn dividends, and avoid capital gains tax until you sell.
Selling shares: You lose ownership and future appreciation but get immediate liquidity.
For most investors, pledging is a smarter way to balance liquidity and long-term wealth creation.
Conclusion
A loan against demat shares is an efficient way to access liquidity without disturbing your investment strategy. By pledging your portfolio, you avail funds for immediate use while continuing to benefit from dividends and market growth. That said, it is important to manage risks carefully, track your portfolio, and plan repayments to avoid surprises.
Unlock liquidity the smart way, pledge your loan against shares portfolio and stay invested for tomorrow while meeting today’s needs. Apply for a loan against shares today!
