The Reserve Bank of India (RBI) has taken a significant step to boost credit access for retail investors by increasing the Loan Against Shares (LAS) limit from ₹20 lakh to ₹1 crore per individual.
This policy shift is set to reshape the way investors leverage their equity holdings, creating new opportunities for liquidity, portfolio management, and smarter wealth planning.
Let’s explore what this means for you — and how to make the most of it.
What Is a Loan Against Shares (LAS)?
A Loan Against Shares (LAS) allows investors to borrow money by pledging their listed shares, mutual funds, or ETFs as collateral.
Instead of selling investments during market volatility, you can access quick liquidity while retaining ownership of your securities.
For example:
If you hold shares worth ₹20 lakh, you can borrow up to 50–60% of their value, depending on the lender’s terms.
What Has Changed?
Until recently, the RBI capped the LAS limit at ₹20 lakh per individual borrower.
Now, that ceiling has been raised to ₹1 crore, giving retail investors much greater flexibility.
Key Highlights of the New LAS Norm:
| Parameter | Old Limit | New Limit |
|---|---|---|
| Loan Limit per Individual | ₹20 lakh | ₹1 crore |
| Eligible Borrowers | Retail investors | Retail investors |
| Collateral Type | Listed shares, ETFs, mutual funds | Same (expanded coverage likely) |
| Borrowing Purpose | Personal, business, or investment needs | Same |
This increase reflects the RBI’s confidence in retail market maturity and aims to strengthen liquidity in the financial ecosystem.
Why This Move Matters
The revised LAS framework has several direct benefits for retail investors and the broader financial market:
1. Enhanced Liquidity
Investors no longer need to sell assets during emergencies. With a ₹1 crore cap, you can unlock higher liquidity without disrupting your long-term portfolio.
2. Smarter Portfolio Leverage
Retail investors can now leverage their holdings for short-term opportunities — such as IPO applications, property down payments, or margin trading — while maintaining equity exposure.
3. Lower Cost of Borrowing
Loans against shares typically carry lower interest rates (9–12%) compared to personal loans (14–18%), making this a cost-efficient borrowing option.
4. Boost for Market Participation
As more individuals access funds without liquidation, market stability improves, encouraging long-term investing habits.
5. Support for NBFC and Broker Ecosystem
NBFCs and brokerage firms providing LAS products stand to gain from higher demand and improved transaction volumes.
Risks to Keep in Mind
While the ₹1 crore limit is empowering, borrowers must stay cautious:
Market Volatility: A sharp drop in share prices can trigger margin calls or forced liquidation.
Interest Accumulation: Long-term LAS loans can become costly if not repaid promptly.
Over-Leverage: Borrowing too much against your portfolio can magnify losses during downturns.
💡 Pro Tip: Always maintain a 20–30% safety margin in your pledged holdings to avoid sudden margin calls.
Example: How It Works
Let’s say you have a stock portfolio worth ₹80 lakh.
Your lender allows 55% funding against it — you can now borrow up to ₹44 lakh.
With the new RBI limit, even portfolios worth ₹1.8 crore or more can now access the maximum ₹1 crore credit facility.
How to Apply for LAS
Approach Your Broker or Bank (like HDFC Securities, ICICI Direct, Zerodha, or Kotak).
Submit Your Demat Account Details.
Select Eligible Shares from the lender’s approved list.
Sign a Pledge Agreement.
Receive Funds Directly into your account — often within 24–48 hours.
The process is paperless and online for most modern lenders.
Who Should Consider LAS
✅ Active investors with long-term holdings.
✅ Business owners seeking short-term working capital.
✅ Individuals avoiding liquidation of profitable shares.
✅ High-net-worth individuals looking to optimize liquidity.
Conclusion
The RBI’s decision to raise the LAS limit to ₹1 crore empowers India’s growing retail investor base to manage liquidity more efficiently.
When used wisely, a Loan Against Shares can serve as a bridge between wealth and flexibility — providing immediate access to funds without sacrificing long-term growth.
However, disciplined borrowing, clear repayment plans, and awareness of market risk remain crucial to truly benefit from this expanded opportunity.
❓ FAQs
1. What is the new RBI limit for Loan Against Shares?
The per-individual limit has been increased from ₹20 lakh to ₹1 crore.
2. Can I use LAS funds for business or personal expenses?
Yes, LAS can be used for business expansion, emergencies, or personal expenses, but not for speculative trading.
3. What happens if the share price falls?
If collateral value drops below the margin requirement, the lender may issue a margin call or sell shares to recover dues.
4. What’s the interest rate on LAS?
Typically between 9% to 12%, depending on the lender and borrower profile.
5. How soon can I get the loan?
Digital LAS facilities offer disbursement within 24–48 hours of approval.
Published on : 8th October
Published by : SMITA
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