What is Loan Against Shares?
If you hold shares but need cash quickly, a loan against shares avoids selling at a poor price or paying capital gains tax. You pledge your shares through your depository participant, the lender sanctions a limit based on their approved value, and you draw funds as needed. The shares stay in your name, but they are frozen while the pledge is active.
This is the riskiest of the loans against financial assets, because equity prices are the most volatile. Lenders accept only liquid, large stocks, apply a heavy haircut and watch the value closely. If prices fall, you may have to add shares or repay part of the loan at short notice, and the lender can sell shares if you cannot.
Loan Against Shares at a glance
| Typical loan amount | Roughly ₹25,000 to ₹1 crore, depending on approved shares and lender policy |
|---|---|
| Tenure | Often 12 months as a renewable overdraft limit, with a few lenders offering longer terms |
| Indicative interest rate | Roughly 9.5% to 15% a year, charged on the amount drawn |
| Processing fee | Often about 0.5% to 1.5% of the limit, plus taxes |
| Security / collateral | Pledge of approved listed equity shares in demat form |
| Typical time to disbursal | Often within a day or two once the pledge is confirmed |
| Loan type | Secured |
Indicative ranges based on general market practice in India. Your offer will differ. Last reviewed 3 October 2026.
Who should consider Loan Against Shares?
- Equity investors who need short-term funds and believe in the long-term value of their holdings.
- Business owners who hold blue-chip shares and want working capital without liquidating.
- Investors who face large capital gains tax if they sell and can repay the loan within months.
- Holders of shares received through employee stock plans who want liquidity without selling.
Loan Against Shares eligibility criteria
| Criterion | What lenders typically look for |
|---|---|
| Eligible shares | Only stocks on the lender's approved list, usually large, liquid, actively traded companies. Penny stocks, suspended shares and newly listed stocks are often excluded. |
| Holding form | Shares must be in dematerialised form in your own demat account and free from other pledges or lock-in restrictions. |
| Applicant | Resident individuals, HUFs, firms and companies are commonly accepted. NRI access depends on lender policy and exchange control rules. |
| Minimum portfolio | Lenders usually require a minimum value of approved shares so that the sanctioned limit is worth setting up. |
| Concentration limits | Lenders may cap how much of the limit can rest on one stock. A diversified set of shares usually gets a better limit. |
| KYC and credit view | Standard KYC applies, and lenders may check credit history and income, with the collateral carrying much of the weight. |
Documents required for Loan Against Shares
- PAN card and Aadhaar for KYC
- Address proof and recent photographs
- Bank statement for three to six months
- Demat account statement showing the shares to be pledged
- Cancelled cheque or bank mandate for disbursal and repayment
- Pledge instruction or pledge request form signed with your depository participant
- Income proof such as ITR or salary slips, where requested
How does Loan Against Shares work, step by step?
- Check the lender's approved stock list. Find out which of your shares qualify and the percentage the lender will lend on each. Many holdings may be rejected or accepted at a very low percentage.
- Apply and complete KYC. Submit KYC and demat details. The lender calculates the eligible limit from the approved value of your shares after applying its haircut.
- Pledge the shares. You create a pledge through your depository participant in favour of the lender. The shares stay in your account but are blocked from sale until released.
- Sanction and limit setup. You receive a sanction letter with the limit, rate, margin call rules and Key Fact Statement. The overdraft account is then activated.
- Draw funds and track value. You draw what you need and pay interest on that amount. Watch share prices and your drawing power, since the limit moves with the market.
- Repay and release the pledge. Repay the drawn amount and request release of the pledge. Check your demat statement to confirm the shares are free to trade again.
Estimate your Loan Against Shares EMI
Example values only. Replace them with the figures in your own offer.
Reducing-balance method. Excludes processing fees, GST, insurance and other charges.
Loan Against Shares interest rate, fees and charges
The interest on the drawn amount is the main cost, but charges for processing, pledge creation and renewal also apply. The biggest financial risk is not a fee but a forced sale: if share prices fall and you cannot top up, the lender may sell your shares at the prevailing price, which can crystallise losses and trigger tax.
- Interest on drawn amount
- Charged daily on the utilised portion of the limit. Unused limit usually does not accrue interest, though renewal fees may apply.
- Processing fee
- A one-time charge based on the sanctioned limit, plus taxes. Some lenders set a minimum fee that matters on small limits.
- Pledge creation and release fees
- Depository participants charge for pledge and unpledge instructions. These are small but can add up with repeated changes.
- Annual renewal charge
- The limit is usually valid for a year, and renewal can attract a fee. The lender may revise the limit based on current prices.
- Forced sale and penal charges
- If you miss a margin call, the lender can sell shares to recover dues. Brokerage, taxes and penal interest then apply to you.
Indicative rates as of October 2026. Figures are market ranges, not offers, and are reviewed every 90 days (next review January 2027). Your rate is fixed by the lender in the sanction letter and Key Fact Statement.
Worked example: what this loan really costs
Illustration for mutual fund units worth about 10 lakh marked under lien, using mid-range figures seen in the market as of October 2026. Your lender's Key Fact Statement will show your own numbers.
| Loan amount | ₹5,00,000 |
|---|---|
| Interest rate (reducing balance) | 10.5% a year |
| Tenure | 24 months |
| Monthly EMI | ₹23,188 |
| Total interest paid | ₹56,512 |
| Total repaid | ₹5,56,512 |
EMI = P × r × (1 + r)n ÷ ((1 + r)n − 1), with r the monthly rate. Processing fees, GST and insurance are extra; the annual percentage rate in the Key Fact Statement includes them. Check the figures in our Loans Against Assets EMI calculator.
Pros and cons of Loan Against Shares
Advantages
- Raise money without selling shares or triggering immediate tax
- Pay interest only on what you draw
- Fast processing compared with property-backed loans
- You can repay and redraw within the sanctioned limit
Limitations
- High volatility means margin calls can come at the worst time
- Only a limited share of value is lent, and only on approved stocks
- Pledged shares cannot be sold freely during the loan
- A forced sale can lock in losses and create a tax bill
Mistakes to avoid with Loan Against Shares
- Pledging one volatile stock
- A single stock can fall sharply on news. Lenders apply heavy haircuts for that reason. If possible, pledge a diversified set of liquid shares.
- Using the loan to buy more shares
- Leverage magnifies losses. If the market falls, you owe interest and the principal while your pledged shares lose value, which can quickly lead to a forced sale.
- Not keeping a top-up reserve
- Margin calls arrive with short deadlines. Keep spare funds or unpledged securities ready, so you can respond without selling at a poor price.
- Forgetting the pledge exists
- Pledged shares are frozen. If you plan to sell, rights issue or bonus decisions arise, confirm how the lender handles them. Unplanned actions can breach the agreement.
Loan Against Shares compared with similar loans
- Loan Against Shares vs Loan Against Securities
- LAS covers shares, mutual funds and bonds together. A loan against shares deals only with equities, which means a lower LTV, a stricter approved list and more frequent margin calls than a mixed or debt-heavy portfolio.
- Loan Against Shares vs Loan Against Mutual Funds
- Mutual fund loans use fund units via a registrar lien, and debt funds can support a higher percentage than equity funds. Shares are individually volatile, so a diversified fund often gets steadier terms than a single stock.
- Loan Against Shares vs Personal Loan
- A personal loan needs no collateral and comes with fixed EMIs at a higher rate. A loan against shares is cheaper, but you risk forced sale of your holdings if prices fall and you cannot top up.
Rules and regulations that apply to Loan Against Shares
RBI has set margin and exposure norms for lending against shares, and these have been revised recently, so the limits and the minimum margin your lender applies can differ and change. Lenders must provide a Key Fact Statement. Read the margin call and forced sale clauses in your agreement carefully.
Rules that protect you, with the source
- Key Fact Statement. For retail and MSME loans sanctioned from 1 October 2024, the lender must give you a KFS with the annual percentage rate and a repayment schedule before you sign, and cannot charge a fee that is not in it. RBI circular, 15 April 2024.
- Pre-payment charges. For floating-rate loans to individuals for non-business purposes sanctioned or renewed from 1 January 2026, no pre-payment or foreclosure charge can be levied. RBI Directions, 2 July 2025.
- Free credit report. Every credit bureau must give you one free full report with score each calendar year. RBI notification, 1 September 2016.
- Complaints. If the lender does not resolve a complaint within 30 days, you can go to the RBI Ombudsman free of charge. Integrated Ombudsman Scheme, 2021 · file at cms.rbi.org.in.
Loan Against Shares: frequently asked questions
How much loan can I get against my shares?
Usually roughly 40% to 60% of the approved value of your shares, depending on the stock and the lender's haircut. Shares worth ₹10 lakh may therefore support around ₹4 lakh to ₹6 lakh. The limit changes as prices move, so it is not a fixed amount.
Which shares are accepted for a loan against shares?
Lenders accept shares from an approved list, typically large, liquid, actively traded companies. Penny stocks, suspended or very volatile shares and recent IPOs are often excluded. Ask the lender for its current approved list and per-stock percentages before you apply.
What is the interest rate on a loan against shares?
Indicatively around 9.5% to 15% a year, depending on the lender, the stocks pledged and your profile. In an overdraft you pay only on the amount you draw, so your actual cost depends on how much you use and for how long.
What is a margin call on shares?
A margin call is a request to add more shares or repay part of the loan because your pledged shares have fallen in value. You normally get a short deadline. If you miss it, the lender can sell some of your shares to bring the loan back within limits.
Do I lose my shares if I take a loan against them?
No, you remain the owner and the shares stay in your demat account, but they are blocked from sale. You lose them only if you default or ignore a margin call and the lender sells them. Repaying releases the pledge and restores full control.
Can I get a loan against shares with a poor credit score?
Possibly, since the shares are the main security and approval leans on their value. A weak credit history may still lower the limit or raise the rate, and lenders can decline. Approval depends on the lender's assessment of both you and your holdings.
Is a loan against shares taxable?
Taking the loan is not a sale, so it does not create capital gains tax by itself. If the lender sells your shares after a margin call or default, that sale is taxable as a capital gain or loss. Speak to a tax adviser for your situation.
Loan Against Shares in your city
Local guidance, documents and an EMI calculator for 1461 cities across India.
Official sources and further reading
These guides are written from Reserve Bank of India rules and official scheme pages. Rules, rates and scheme terms change, so check the current position on these sites and in your lender's Key Fact Statement before you apply.
- SEBI. The securities market regulator, relevant to loans against shares, mutual funds and bonds.
- RBI: Key Facts Statement (KFS) for loans and advances. The Reserve Bank of India notification that tells lenders to give every borrower a plain-language statement of the full cost of a loan.
- RBI Complaint Management System. Where to take a complaint against a bank, NBFC or other regulated lender if the lender does not resolve it.
- RBI (Pre-payment Charges on Loans) Directions, 2025. Bars pre-payment charges on floating-rate loans taken by individuals for non-business purposes, for loans sanctioned or renewed from 1 January 2026.
- Reserve Bank - Integrated Ombudsman Scheme, 2021. The single complaint scheme for customers of banks, NBFCs and other RBI-regulated lenders.
- RBI: Free Annual Credit Report to Individuals. Credit bureaus must give you one free full credit report with score every calendar year.
- RBI Financial Education. Consumer guidance from the Reserve Bank of India on borrowing, fraud and your rights as a customer.
Edited by Hemant Kumar. Rates on this site are indicative ranges, not offers.
This page is general information, not personalised financial advice and not an offer. Rates and terms shown are indicative and vary by lender and applicant. Verify with the lender and read the Key Fact Statement before you sign.