Loan against securities is a loan where you pledge your shares, Mutual Funds or Life Insurance policies as collateral to the bank, which is against your loan amount. This loan is typically offered as an overdraft facility in your account after you have deposited your securities. You can withdraw money from the account, and you have to pay interest only on the loan amount you use and for the period you use. For example, if you are offered a Loan against Shares of Rs 2 lakhs and you withdraw Rs 50,000 for your use and deposit the amount back in your account in one month. In this case, you are liable to pay interest only for 1 month on Rs 50,000.

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One should know that the amount of loan, you are eligible for, depends on the value of securities you offer as collateral. Country’s largest lender, State Bank of India (SBI), has the option to leverage your investments in shares for loans to meet unforeseen expenses.

SBI offers loans up to Rs 20 lakhs against your shares to enable you to meet contingencies, personal needs or even for subscribing to rights or new issue of shares. SBI offers Minimum loan amount of Rs 50,000 and a maximum of Rs 20 lakh. Customer should know that loans against shares do not exceed Rs 10 lakh if the purpose of the fund is to subscribe to IPOs. Here is the brief explanation of interest rates against different securities.

Interest rates on SBI loans
If the Loan is against Bank Time Deposits then the rate of Interest is 1.00% over the rate paid on Relative time deposit. If the Loan is against NRO Fixed Deposit then the rate of Interest is 1.00% over the rate paid on Relative time deposit. If the Loan is against NRE Fixed Deposit then the rate of Interest is 1.00% over the rate paid on Relative time deposit. If the Loan is against Floating Rate Term Deposit then the rate of Interest is 1.50% over the rate paid on Relative time deposit

If the loan is against Loan against security of FCNR (B) Deposit then the rate of Interest is 240 bps above 1-year MCLR i.e., 11.30% p.a.

Loans against Shares / Debentures / Bonds

Loan for subscription to IPOs

Loan against units of SBI Debt Fund Series

If the Loans is against NSCs/KVPs/RBI Relief Bonds/Surrender Value of SBI Life /LIC/SBI Magnums, etc then the rate of Interest is 4.65% above 1 year MCLR, currently 13.55% p.a.