RBI Guidelines to Avail Loan Against Securities

Learn about the RBI's guidelines for getting a loan using your investments as security.
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3 mins read
03-June-2025

Ever wondered if you’re doing the right thing by pledging your securities to borrow money? You're not alone. With the rise in demand for smart, asset-backed loans, knowing the RBI guidelines on loan against securities has become more critical than ever. Whether you are a seasoned investor or a first-time borrower, navigating through the RBI regulations on loan against securities can seem overwhelming. But here’s the truth: understanding them could save you from compliance hiccups, penalties, or even overleveraging.

Let’s simplify it together.

What is a loan against securities?

A loan against securities (LAS) is a credit facility where you pledge your financial investments like shares, mutual funds, bonds, or insurance policies as collateral in exchange for a loan.

Instead of liquidating your assets during financial crunches, LAS allows you to raise funds while retaining ownership of your investments.

Did you know? RBI introduced LAS norms under its Master Circular to ensure transparency, fair valuation, and responsible lending practices in the market. The result? A safer credit ecosystem for lenders and borrowers alike.

Get instant funds by pledging your investments no need to sell! Apply for a loan against securities now

Why are RBI guidelines important in loans against securities?

The Reserve Bank of India (RBI) plays a pivotal role in framing regulatory norms for LAS to ensure that borrowers don’t end up overexposed and NBFCs (non-banking financial companies) maintain lending discipline.

Here’s why the RBI guidelines matter:

  • Borrower protection: You are safeguarded from over-leveraging or unfair loan terms.
  • Valuation accuracy: The guidelines ensure securities are correctly valued and loan amounts are fairly derived.
  • Market stability: The rules help reduce the risk of systemic shocks in capital markets.

So, the next time you pledge your portfolio for a loan, know that loan collateral securities RBI guidelines are working silently in your favour.

Loan Against Shares
Loan Against Mutual Funds

Key RBI guidelines for loan against securities

Let’s break down the most essential RBI guidelines loan against shares and other securities, simplified for everyday borrowers.

1. Eligible lenders

  • Only scheduled commercial banks (excluding RRBs) and select NBFCs registered with RBI are permitted to offer LAS.
  • These lenders must follow the loan eligibility securities RBI framework.

2. Type of eligible securities

RBI allows loans against:

  • Listed shares (equity)
  • Mutual funds (equity and debt)
  • Dematerialised bonds and debentures
  • Government securities
  • Life insurance policies with surrender value

Pledging unlisted shares, penny stocks, or speculative instruments is generally restricted.

3. Loan-to-Value (LTV) ratio

This ratio dictates how much you can borrow against your securities. For example:

  • Loan against shares: LTV is capped at 50% of the value.
  • Loan against mutual funds: LTV can range from 90%, depending on the fund type.
  • Loan against bonds or insurance: Subject to the lender’s risk appetite and RBI compliance.

4. Margin maintenance

You must maintain a minimum margin (difference between asset value and loan amount) throughout the loan tenure. If markets fluctuate and the value of your securities drops, you may need to top up your collateral.

5. Tenure and usage

  • LAS is typically sanctioned as an overdraft facility or term loan for up to 36 months.
  • RBI discourages using LAS funds for speculative purposes like margin trading.

6. Disclosures and documentation

  • KYC compliance, pledge documentation, and fair disclosure of end-use are mandatory.
  • Transparency in processing charges and interest rates is a must.

Get instant funds by pledging your investments no need to sell! Apply for a loan against securities now

Borrowing against securities: What do RBI rules say about shares?

Among the most common forms of LAS is a loan against shares. Here’s what RBI specifically outlines for such transactions:

  • LTV limit: 50%
  • Eligible shares: Only listed and actively traded equity shares
  • Disbursal format: Often in overdraft format with interest charged only on the utilised amount
  • Periodic review: Lenders must review the pledged stock’s value frequently

RBI also mandates that NBFCs should:

  • Obtain credit reports before sanctioning large exposures
  • Use automated platforms like NSDL/CDSL for share pledge and monitoring
  • Inform borrowers about margin calls in case of sudden value dips

RBI regulations for loan against mutual funds and bonds

Apart from shares, you can also raise funds against debt instruments and MFs. Here’s what RBI guidelines for loan against mutual funds and bonds generally cover:

Mutual funds:

  • Debt mutual funds carry lower risk and often fetch a higher LTV (up to 90%)
  • Equity mutual funds are subject to 50% LTV
  • NAV-based valuation must be followed as per RBI norms

Bonds and debentures:

  • Must be rated by SEBI-registered credit rating agencies
  • Only dematerialised instruments are allowed
  • LTV varies based on issuer and credit quality

Who is eligible to borrow under RBI norms?

As per loan eligibility securities RBI guidelines, the following borrowers qualify:

  • Salaried individuals with verifiable income and demat holdings
  • High-net-worth individuals (HNIs) with significant market exposure
  • Corporates and trusts with investment-grade portfolios
  • NRIs (in select cases), depending on lender and RBI approvals

Lenders will also assess:

  • Age and repayment capacity
  • End-use intent (not for speculative trading)
  • Portfolio diversification to reduce concentration risk

Why not opt for unsecured loans?

Here’s the catch: unsecured loans may be quick, but they come at a price higher interest rates and rigid terms.

With LAS:

  • You retain ownership of your assets
  • Interest rates are significantly lower
  • You only pay interest on the used amount (in overdraft models)

Comparing unsecured loans vs. LAS is like choosing between a high-interest personal loan and a flexible credit line backed by your own wealth.

Ready to borrow smart? Apply for a LAS today

What is Loan to Value (LTV) and why it matters?

LTV determines your maximum borrowing limit and is critical for your financial planning.

Let’s say you pledge shares worth Rs. 10 lakh:

  • You can get up to Rs. 5 lakh (50% LTV) as a loan.
  • If markets rise and the portfolio grows, you can request a top-up.
  • If values dip, a margin call may require you to repay or add more collateral.

Understanding LTV helps you avoid unpleasant surprises. It also guides you in choosing which assets to pledge based on stability and risk appetite.

When should you consider a loan against securities?

Here are a few real-world cases where LAS shines:

  • Medical emergency: Need Rs. 3 lakh urgently? Pledge mutual funds and get instant liquidity.
  • Business expansion: Raise Rs. 25 lakh against bonds without touching working capital.
  • Child’s education: Instead of liquidating your long-term shares, use them to fund overseas tuition.

As long as you have an eligible portfolio, borrowing against securities as per RBI rules is one of the most strategic financial decisions you can make.

What happens during a margin call?

A margin call is a lender's request for additional collateral or partial repayment when the value of pledged securities falls below the required margin.

You typically have 7–10 working days to meet the margin shortfall. Failing to do so could result in the lender selling your pledged securities to recover dues.

RBI guidelines require lenders to:

  • Provide written notice of margin shortfalls
  • Offer a fair window to take corrective action
  • Execute recovery without undue harassment

Staying aware of your collateral’s value and market trends can help you pre-empt margin calls.

Benefits of choosing a compliant LAS provider

Choosing a lender who follows RBI regulations loan against securities ensures:

  • Fair and transparent valuation of assets
  • No hidden charges or arbitrary foreclosure rules
  • Prompt margin alerts and ethical recovery processes
  • Compliance with SEBI and RBI standards

With Bajaj Finserv, you get:

  • Digital LAS journey with 24x7 access
  • Loans starting from Rs. 10,000 up to Rs. 100 crore+
  • Competitive interest rates and zero part-prepayment charges

How to apply for a loan against securities?

The process is simpler than you think:

Step-by-step:

  1. Check eligibility based on your portfolio and KYC
  2. Select securities you want to pledge
  3. Submit documents online or via a relationship manager
  4. Receive offer based on valuation and LTV
  5. Get funds disbursed to your account often in 24 hours

Want funds without selling your assets? Apply for a loan against securities in just a few clicks

Conclusion

Borrowing against securities is a powerful financial tool—when used wisely and within regulatory bounds. The RBI guidelines loan against securities are not just legal formalities; they’re frameworks to keep you protected, informed, and financially balanced.

So whether you are pledging shares, mutual funds, or bonds, choose a compliant NBFC that puts transparency and efficiency first.

Pledge smart. Borrow responsibly. Apply now for a hassle-free Loan Against Securities

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Frequently asked questions

What are the RBI guidelines for loan against securities?

The RBI guidelines for loans against securities state that for loans exceeding Rs.5 lakh intended for investment in capital markets, lenders must accept only Group 1 securities as collateral. These securities are specified in the SEBI circular SMD/Policy/Cir-9/2003 dated March 11, 2003 and are subject to periodic review by the Reserve Bank. This ensures a secure lending environment by relying on highly rated securities.

What are the rules for pledged shares in RBI?
The RBI mandates that Non-Banking Financial Companies (NBFCs) must maintain an LTV ratio of 50% for loans against pledged shares. Only highly liquid and low-risk Group 1 securities are accepted as collateral for larger loan amounts, ensuring market stability.
Is there a loan-to-value (LTV) ratio prescribed by the RBI for securities-backed loans?

Yes, the RBI mandates a maximum LTV ratio of 50% for loans against shares and mutual funds. For other eligible securities, the LTV may vary based on the security’s risk profile and lender’s internal policies.
Which types of securities are eligible as collateral under RBI norms?

RBI permits loans against dematerialised shares, mutual funds, bonds, debentures, government securities, and life insurance policies. These must be listed or approved by the lender and held in the borrower’s name.

What is the maximum amount I can borrow against securities as per RBI guidelines?

RBI does not cap the loan amount directly. However, the maximum loan depends on the type and value of the pledged securities, the applicable LTV ratio, and the lender’s internal credit assessment.