Mirae Asset Financial Services (MAFS) has launched a facility of Loan Against Shares (LAS) for investors to enable them to raise loans in a snap of a finger without having to redeem their investments – in part or full.
It will be available via a mobile app to the shareholders who have NSDL-registered demat accounts.
The idea behind this is to enable investors to use their investments to raise money for short-term expenditures without having to redeem those shares.
“Loan against shares will give more options to customers to manage their unplanned and short-term expenses. It allows investors to protect their investments and provide liquidity to manage short-term expenses like traveling, medical expenses, house repairs, etc at the same time,” said Krishna Kanhaiya, CEO of Mirae Asset Financial Services (India).
Who can avail this facility?
To be able to avail the loan, customers must have NSDL demat accounts. Also, to be able to avail this option, one should have access to the MAFS mobile app. And it goes without saying that one should have securities of the requisite amount to be able to raise the loan.
What are the limits?
The loan amount can range anywhere between ₹10,000 and 1 crore. The amount is given as an overdraft facility and one can withdraw as much money as required. For instance, if Mr X has a loan facility of ₹5 lakh and he wants to borrow only ₹2 lakh – he is free to exercise his discretion.
What is the process involved?
First and foremost, app users can apply for a loan against shares (LAS) limit i.e., a form of overdraft facility. This limit can be a minimum of ₹10,000 and can be a maximum of ₹1 crore.
To be able to apply for this facility, one must pledge the securities. However, it is important to note that the securities must be part of the list of shares which can be accepted as collateral. Not all shares will be accepted. Particularly, highly volatile shares will not be acceptable for obvious reasons.
Once an overdraft account is created, one can use the limit to take a loan within the threshold. Upon withdrawal of money, it will be transferred to the user’s bank account. And the financial institution will levy an interest at the rate of 9 percent on the sum that is withdrawn and only for the duration the money is used.
As and when one wants to repay the loan, they can foreclose it by making the payment. It essentially works like a bank’s overdraft facility wherein interest is charged only for the amount withdrawn and for the time duration the loan money is utilised.
Digitised process: The entire process of applying and availing of loan is digitised. Right from the process of initiation of loan, pledging of securities in demat account and disbursement of money, the process is completely automated and digitised.
“NSDL Demat Account Holders who are in need of quick and fast loan for their personal needs or even emergencies can now look beyond traditional means and avail it in digital mode,” said Padmaja Chunduru, MD & CEO of National Securities Depository Ltd (NSDL).
Rights over pledged shares: Although the securities are pledged in the demat account for the LAS facility with Mirae Asset, the account holders will continue to enjoy the corporate benefits that are received in their pledged shares.