Loans against units of mutual funds

Are granted only to those units that are listed in the stock exchange or for those units for which repurchase facility is available. If there is a lock in period in the scheme then the scheme should have completed the minimum lock in period stipulated. The amount of advance is linked to the net asset value/repurchase price or the market value whichever is less and not to the face value. Banks ensure that the advance should not be granted for subscribing to or boosting up the sales of another scheme of mutual funds or for the purchase of shares/debentures/bonds. Compared to loans against shares, the extent of funding against mutual funds is generally lower at 40-50% of the base NAV.


Banks normally follow certain guidelines while sanctioning advances against shares/debentures

ü  The advance should be purpose oriented, taking into account the credit requirements of the investor

ü  The normal procedures for the sanction, appraisal and post sanction follow up is followed

ü  Advances against the primary security of shares/debentures/bonds are not combined with any other advance.

ü  Banks satisfy themselves about the marketability of the shares/debentures and the net worth and working of the company whose shares/debentures/bonds are offered as security.

ü  Shares/debentures/bonds are valued at prevailing market prices when they are lodged as security for advances.

ü  Advances against partly paid shares are not granted.




The advantages to customers obtaining loans against shares/debentures is

ü  It enables instant liquidity against shares without selling them

ü  It takes care of all investment as well as personal needs.

ü  It is ideal for short term funding

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