A Loan Against Securities (LAS) is a credit facility — typically structured as an overdraft — where you pledge your financial securities (mutual fund units, listed shares, bonds, insurance policies, government securities) as collateral with a bank or NBFC. You retain ownership of the securities and continue to earn dividends, interest, or NAV appreciation; the lender merely holds a lien or pledge on them until the loan is repaid.

LAS is fundamentally different from selling your investments: selling triggers capital gains tax, permanently exits your position, and forces you to time the market for re-entry. LAS lets you access liquidity without breaking your investment compounding — which, over a 10-year horizon, is often the more valuable outcome. This is why LAS is the preferred liquidity tool for wealth-conscious investors who hold long-term portfolios.

Eligible Securities: What Banks Will and Won’t Accept

Not all securities are treated equally. The LTV (Loan-to-Value) ratio — the percentage of your security’s value the bank will lend — varies dramatically based on the type, liquidity, and volatility of the collateral. SEBI regulates the maximum LTV for LAS products to prevent excessive leverage.

LAS Interest Rates in 2026: What Banks Are Actually Charging

LAS is one of India’s most competitively priced credit products because the collateral is highly liquid and easily realised. Unlike LAP where property valuation and legal risk create wide rate spreads, LAS rates are tighter — ranging from 8.50% to 11.00% p.a. with overdraft interest charged only on the amount drawn, only for the number of days used. The effective annualised cost is often far lower than the stated rate if you draw and repay frequently.

Current LAS Rate Benchmarks by Lender (April 2026)

LAS Eligibility: Simpler Than You Think

LAS has the most straightforward eligibility criteria of any secured loan product in India — because the collateral itself is the primary underwriting basis. Unlike LAP or home loans where income verification, FOIR, and property legal status dominate, LAS eligibility hinges primarily on what you hold and its current market value.

How LAS Works: From Application to Overdraft in 72 Hours

The LAS process is the fastest of all secured loan products in India. For mutual fund pledge through major banks (SBI, HDFC, ICICI), the entire process is digital — from pledge creation to OD activation — often completed within 24–48 hours without physical documentation. Here is the end-to-end flow:

Margin Calls & Market Risk: The Part Most Borrowers Ignore

The single biggest risk in LAS — and the one most borrowers underestimate — is the margin shortfall. When the market value of your pledged securities falls, your OD limit falls with it. If your outstanding drawn amount exceeds the revised limit, the bank issues a margin call requiring you to either repay the excess or pledge additional securities within a short window — typically 2–5 business days.

Tax Implications, and When LAS Makes More Sense Than Selling

The tax treatment of LAS interest depends on its end-use — exactly as with LAP. But LAS has a unique tax advantage: since you are not selling the securities, you defer all capital gains tax for as long as you hold the pledge. This deferral can be financially significant, especially for long-held equity holdings with large embedded gains.

• 1
  Business Use: Fully Deductible Under Section 37(1)

  If LAS proceeds are used for business purposes — working capital, trade financing, business expansion — the entire interest is deductible as a business expense. For a self-employed professional or business owner paying 9.5% on ₹30 lakh drawn for business, ₹2.85 lakh annual interest is fully deductible at 30% tax slab, saving ₹85,500 annually. Maintain clean evidence of end-use: deposit into the business current account, and document the purpose in board minutes or a written note.
• 2
  Capital Gains Deferral: The Hidden Tax Advantage

  An investor with ₹50 lakh in equity MF holdings purchased 5 years ago at ₹25 lakh has an embedded LTCG of ₹25 lakh. If sold to raise ₹20 lakh cash, LTCG tax of ₹1.25 lakh (10% on ₹12.5L above exemption) is payable immediately, and the investment is exited at current prices, potentially missing future appreciation. LAS against these units at 9% for 1 year costs ₹1.8 lakh interest. But the portfolio stays invested — if it grows 12% in that year (₹6 lakh), the net benefit of LAS over selling is ₹6L gain + LTCG deferral – ₹1.8L interest = well over ₹5 lakh in net value. Numbers shift with holding periods, but the framework is powerful.
• 3
  SIP Continuity Value

  Redeeming a mutual fund holding to meet a short-term liquidity need disrupts the rupee-cost averaging and compounding of a long-term SIP. If the SIP has run for 7 years and you redeem in a correction to raise cash, you sell at a low point and lose both the units and future NAV recovery. LAS allows you to borrow against those units, keep the SIP running, and repay the OD from your next salary or business income cycle. For investors committed to 15–20 year wealth creation through SIPs, LAS is a structurally superior liquidity tool compared to partial redemption.
• 4
  When Selling Is Better Than LAS

  LAS is not always the right choice. Sell rather than pledge if: (1) you need permanent capital for a purpose (buying a home, funding retirement — not a temporary need); (2) the interest rate on LAS exceeds the expected return on the pledged securities (pledging liquid funds at 7% expected return and paying 9.5% LAS interest destroys value); (3) the holding is loss-making and you can harvest the capital loss for tax set-off; (4) you are within the ₹1 lakh LTCG exemption and the tax cost is minimal. LAS is a bridge tool, not a substitute for prudent portfolio management.

LAS Mistakes That Indian Investors Must Avoid

These are the most costly and recurring errors made by LAS borrowers across India. Each is avoidable with the right framework — and each has caused real financial harm.

LAS Action Plan: Get Your Overdraft in 3 Days

If you hold mutual funds or listed shares worth ₹2 lakh or more, you can likely activate a LAS overdraft within 72 hours. Here is the fastest path to doing it correctly:

• 1
  Identify Your Eligible Securities

  List all your MF folios and demat holdings. Check the bank’s eligible fund list (available on the bank’s LAS page). Debt and liquid funds are almost universally eligible; equity funds from major AMCs (Mirae, HDFC, ICICI, SBI, Axis, Nippon) are widely accepted. Exclude holdings under 1 year (STCG rate applies on forced sale), ELSS under lock-in, and NFOs under 1 year. Identify how much of your portfolio is unpledged and eligible.
• 2
  Calculate the Buffer-Safe Draw Amount

  Take 50% of your eligible equity MF/share portfolio value (this is your approved OD limit). Then take 60–65% of that limit as your safe draw amount. This is your buffer-safe LAS. Example: ₹40L equity MF → ₹20L OD limit → ₹12–13L safe draw amount. Draw this amount or less. Never plan to draw more than 65% of your limit unless the need is short-term (under 30 days) and repayment is certain.
• 3
  Apply Through Your Primary Bank’s Digital Channel

  For fastest processing, apply through the bank where you hold your primary savings account. HDFC, ICICI, SBI, and Axis all have fully digital LAS applications on their net banking portals. Upload PAN, Aadhaar, and the folio/demat details. Complete e-sign. The pledge request goes to CAMS/KFintech/CDSL automatically. For first-time applicants, physical branch visit may be required at some banks — check online first. The entire process: 24–72 hours from application to active OD limit.
• 4
  Set Up Market Value Alerts

  Immediately after LAS activation, set up price alerts on your investment platforms (Groww, Zerodha, MF Central) to notify you when your pledged portfolio falls by 15% and again at 25% from the pledge date value. This gives you early warning to either repay partially or add securities before the bank issues a formal margin call. Proactive management of LAS prevents forced liquidation — the worst possible outcome.
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  Contact Our Advisory Team for Multi-Bank Comparison

  LAS rates and eligible security lists vary meaningfully across lenders. Our team works with 12+ banks and NBFCs to find the best LAS structure for your specific portfolio — mutual fund composition, share holdings, bond portfolio, or insurance policies. We also handle margin call management advisory and help clients restructure LAS when portfolio values shift. Free consultation, no commitment.