Unlock the Power of Shares, Debentures and bonds held in lockers take loan against them

Now a days people don’t look outwards instead they look inside their house for funding their personal needs or contingencies. By this we mean they look for good old shares lying with them in physical form( or in demat form for the smart investor).  Banks have also taken note of this and providing advances against security of shares, debentures and bonds to individuals, share and stock brokers and market makers.

A loan against share(LAS) is a facility offered by banks against the security of shares owned by either or immediate relatives known as third party pledgers.

Advantage- Provides immediate credit to the borrower while remaining the owner of shares which are only blocked by lender bank.

Eligibility to avail this facility- Can be offered only against shares that feature in bank’s approved list.

These loans are granted to individuals to meet contingencies and personal needs or for subscribing to new or rights issues of shares / debentures / bonds or for purchase in the secondary market, against the security of shares / debentures / bonds held by the individual.

Credit Limit-The amount of loan generally does not  exceed the limit of Rs. 10 lakhs per individual if the securities are held in physical form and Rs. 20 lakhs per individual if the securities are held in dematerialised form.

Margin kept by banks- Minimum margin of 50% of the market value of securities in case they are held in physical form and 25 % in case of dematerialized forms.

A current account is opened in the borrower's name with a set credit limit set. A personalised cheque book, ATM card, and mobile and phone banking are provided for transactions

Loan is normally given in the form of overdraft facility against the pledge of the securities. Interest has to be paid for the amount and period for which the overdraft facility is utilized. A declaration is obtained from the borrower   indicating the details of the loans / advances availed against shares and other securities, from any other bank, in order to ensure compliance with the ceilings prescribed for the purpose.

Benefits of Loan Against Shares

  1. Instant liquidity against shares without surrendering the ownership of shares
  2. Caters to short term funding requirements for investment, contingencies as well as personal needs
  3. Single scrip lending is also allowed but against higher rate of interest.
  4. Interest is charged only on the utilized amount.
  • By Admin
  • 05 Apr 2017
  •   0

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