Loan Against Shares Loan-to-Value Ratio (LTV)

Understand what is Loan-to-Value ratio while applying for a loan against your securities.
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3 mins read
14-October-2025

If you own shares and need quick access to funds, pledging them instead of selling could be a smarter move. A loan against shares lets you unlock liquidity while you continue to enjoy ownership benefits like dividends and potential market gains. It’s a practical way to raise funds for business, investments, or personal goals without disturbing your long-term portfolio. But before taking this step, it is important to understand one key factor the Loan-to-Value (LTV) ratio. This ratio decides how much you can borrow against your shares and helps both you and the lender manage financial risk efficiently.

Need funds but do not want to sell your shares? Apply for a loan against securities and turn your portfolio into a powerful source of instant liquidity.

What is Loan to Value ratio for shares?

The Loan-to-Value (LTV) ratio for shares is a percentage that tells you how much of your shareholding’s market value can be used to borrow funds. For example, if you own shares worth Rs. 10 lakh and the lender offers an LTV of 50%, you can get a loan of up to Rs. 5 lakh.

It is essentially a balance between opportunity and safety. While it allows you to access capital, it also ensures that both you and the lender are protected from sudden market swings.

Why LTV matters?

A higher LTV means more funds, but it also carries higher risk if share prices fall. A lower LTV provides greater stability, offering a buffer against market fluctuations. The ideal ratio depends on your financial goals and the lender’s policies.

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RBI rules: LTV for loan against shares (LAS)

To ensure transparency and safeguard investors, the Reserve Bank of India (RBI) has clearly defined how the Loan-to-Value ratio should be applied to loans against shares. These guidelines ensure responsible lending while allowing investors to access liquidity securely. Here is what you should know:

  • Maximum LTV cap: NBFCs can lend up to 50% of the market value of the shares pledged.

  • Eligible securities: Only approved and listed shares can be pledged.

  • Margin requirements: Lenders maintain a margin to protect against sudden price drops.

  • KYC and documentation: Borrowers must comply with KYC and verification norms.

  • Regular monitoring: Lenders must track the market value of pledged shares and act if prices dip significantly.

These measures protect you from over-leveraging and ensure a fair lending process.

How is LTV for shares calculated?

To calculate the Loan-to-Value (LTV) ratio for a loan against shares, you need to determine what portion of your shares' market value can be borrowed. The LTV ratio helps assess the risk level for lenders and can influence the terms of your loan.

Step-by-step calculation

  1. Identify the loan amount: This is the total sum that the lender is willing to lend you based on your shares.
  2. Determine the market value of your shares: This is the current trading value of the shares you are using as collateral.
  3. Apply the LTV formula: The LTV ratio is calculated by dividing the loan amount by the market value of the shares, then multiplying by 100 to get a percentage.

Maximum loan against shares limit

The maximum limit for a loan against shares depends on several factors:

LTV ratio

  • The higher the LTV ratio, the higher the potential loan amount relative to the value of the shares.

Regulatory caps

  • Regulations may cap the maximum loan amount to prevent excessive risk-taking by both borrowers and lenders.

Lender's assessment

  • Lenders consider your financial health, the quality of shares, and market conditions to determine the maximum loan they can safely offer.

Purpose of loan

  • The intended use of the loan can also influence the maximum limit, as lenders might allocate more funds for investment or business purposes compared to personal use.

Minimum loan against shares limit

The minimum loan amount that can be secured against shares is just as important to understand, especially for those looking to meet smaller financial requirements.

Factors influencing the minimum limit

The actual amount you receive doesn’t depend on LTV alone. Lenders assess several other factors before deciding how much to offer. 

  1. Type of shares pledged: Shares of large, stable companies usually qualify for higher LTVs. Volatile or less-traded stocks may fetch a lower value.
  2. Borrower’s financial profile: Your income stability, existing liabilities, and credit score influence the loan amount and interest rate.
  3. Market trends: During bullish markets, lenders may feel more comfortable offering higher limits, while volatile conditions may tighten policies.
  4. Purpose of the loan: Loans taken for business or investment purposes might be treated differently from personal expense loans.

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Strategic considerations

For borrowers, understanding the minimum limit is essential to determine if a loan against shares is a suitable option for their specific financial needs, particularly if they do not require large sums of money.

What happens when share prices fluctuate?

The stock market can change overnight, and so can the value of your pledged shares. When this happens, the LTV ratio may shift sometimes triggering what’s called a margin call. If the value of your shares drops significantly, the lender might ask you to:

  • Provide more collateral, or

  • Partially repay the loan to maintain the approved LTV ratio.

Failing to do so could result in the lender selling part of your pledged shares to restore balance. This is why it is essential to keep track of market movements and avoid over-borrowing.

Key benefits of understanding your LTV ratio

Knowing how LTV works can save you from surprises and help you borrow more strategically. Here’s how it helps:

  • Better financial planning: You know exactly how much liquidity your shares can unlock.

  • Risk management: You can plan your repayments and avoid forced liquidation.

  • Negotiation power: Being informed helps you secure better terms and rates.

  • Confidence during market shifts: Awareness of limits lets you act quickly during price drops.

In short, understanding your LTV gives you control — not just over your loan, but over your entire financial approach.

Tips for managing your loan against shares wisely

Taking a loan against shares can be rewarding if handled smartly. Here are a few pointers: 

  1. Borrow only what you need – Avoid over-leveraging your portfolio.
  2. Monitor share prices regularly – Stay informed to prevent margin calls.
  3. Read the fine print – Understand terms around repayment, prepayment, and penalties.
  4. Plan your repayment – Ensure steady cash flow to service interest costs.
  5. Diversify your portfolio – Reduces exposure to market-specific risks.

Conclusion

A loan against shares is one of the smartest ways to unlock liquidity while preserving your long-term investments. Understanding the loan-to-value for shares helps you make better borrowing decisions and maintain financial control, especially during volatile markets. By being aware of RBI guidelines, lender policies, and market trends, you can use this facility to meet short-term goals whether it’s for business expansion, emergency needs, or new investment opportunities. Just remember, while your shares work as collateral, your financial discipline determines how efficiently you can benefit from them. Borrow responsibly, track your portfolio, and let your assets help you achieve more.

Your shares can do more than grow in value. Turn them into instant liquidity when you need it most explore your borrowing potential. Apply for a loan against shares today

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Frequently asked questions

What is 70% loan-to-value?

A 70% loan-to-value (LTV) ratio means that the lender is providing a loan that is worth 70% of the property or asset's value, with the borrower providing the remaining 30% as a down payment. This financial metric is used by lenders to gauge the risk associated with the loan. For example, if a property is valued at Rs. 1,00,000, a 70% LTV would result in a loan amount of Rs. 70,000, requiring the borrower to make a down payment of Rs. 30,000.

What does 80% LTV mean?

An 80% LTV means that the loan covers 80% of the total value of the property or asset, with the borrower covering the remaining 20% as a down payment. This LTV ratio is typical in home mortgages and signifies a moderate risk level for lenders. If a property is valued at Rs. 2,00,000, an 80% LTV would equate to a loan of Rs. 1,60,000, with the borrower providing Rs. 40,000 upfront.

How do you calculate loan-to-value?

To calculate the loan-to-value ratio, divide the loan amount by the appraised value or purchase price of the property, and then multiply by 100 to convert it to a percentage. For example, purchasing a house valued at Rs. 2,50,000 with a loan of Rs. 2,00,000 would have an LTV ratio of (Rs. 2,00,000 / Rs. 2,50,000) * 100 = 80%. This calculation is critical for lenders to assess the risk level of the loan.

What is the loan value of a stock?

The loan value of a stock refers to the maximum amount a lender is willing to lend against shares of that stock, typically determined as a percentage of the shares' market value. Factors like stock volatility and market liquidity influence this percentage. For a less risky stock, lenders might offer up to 70% of the stock's value as a loan. Thus, owning Rs. 10,000 worth of such a stock could potentially secure a loan of up to Rs. 7,000.

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