Need Cash Without Selling Stocks? Here's How a Loan Against Shares Works and What Are The Risks

Stock market investors who are in need of cash can get money without selling their investments by using Loan Against Shares (LAS). If you are in need of funds for business expansion, personal expenses, or short-term liquidity, LAS allows you to borrow against your investment portfolio while still holding your own shares.

Here is everything you need to know about loans taken against your equity shares

What Is a Loan Against Shares?

A Loan Against Shares or LAS, also known as a loan against securities, is a secured loan where investors pledge their shares, mutual funds, bonds, ETFs, or insurance policies as collateral to raise funds.

Instead of selling investments and potentially missing future gains, borrowers can get liquidity while having the ownership of their assets.
For example, if you own shares worth Rs. 10 lakh, a lender may allow you to borrow up to Rs. 5 lakh against those holdings, depending on the permitted Loan-to-Value (LTV) ratio.

How Does a Loan Against Shares Work?

The process is very straightforward. Investors pledge eligible securities through their demat account, and the lender sanctions a credit limit based on the value of the pledged assets.

Under current RBI guidelines, lenders generally offer a maximum 50% LTV ratio for loans against shares and equity mutual funds. This means shares worth Rs. 10 lakh can typically fetch a loan of up to Rs. 5 lakh.

It is different from traditional loans as the credit limit is not fixed. Since stock prices fluctuate daily, lenders continuously monitor the value of pledged securities. If share prices decline, the eligible loan amount also falls.

Loan Against Shares Interest Rates in 2026

One of the biggest attractions of LAS India is its relatively lower interest rate compared to unsecured loans.

Loan against shares interest rates currently range between 8% and 24% per annum, depending on the lender, borrower profile, and quality of the pledged securities.

Prime borrowers pledging blue-chip stocks can access rates as low as 6.75% to 9%, while most borrowers typically pay between 10% and 15%. However, personal loans often carry interest rates above 14% to 24%.

RBI and SEBI Rules for Loan Against Shares

The RBI has prescribed a maximum 50% LTV ratio for loans against shares and equity mutual funds. Only highly liquid securities are generally accepted as collateral for larger loans.

The pledged shares must be held through authorised depositories, for transparency and proper tracking of ownership.

Importantly, RBI guidelines prohibit borrowers from using LAS funds for speculative purposes such as margin trading or leveraged stock market bets. The funds are meant for genuine business, personal, or liquidity requirements.

The Biggest Risk: What Happens When Markets Fall?

The biggest risk associated with pledged shares comes during sharp market corrections.

When stock prices decline, the value of the pledged collateral also falls. As a result, the borrower may no longer meet the required LTV ratio, creating a margin shortfall.

This triggers a margin call, where the lender asks the borrower to either pledge additional securities or repay part of the outstanding loan.
If the borrower fails to meet the margin call within the specified timeframe, the lender has the right to sell the pledged shares to recover dues.
This process, known as forced liquidation, can result in investors permanently losing their shares at depressed market prices.