Retail brokerage firm Zerodha which received its NBFC license 2 years back has been working to come up with its loan against securities product for 2 years now. And the company which recently attained a valuation $1 billion on account of share buyback from employees will now launch this loan product by August end.
"Last year, Securities and Exchange Board of India (SEBI) changed some rules around 'lending against security' and we had to rebuild our entire product. We launched our 'loan against securities' product in closed beta, a month back and the feature should go live in the next 4-5 weeks. We plan to steadily open this product to our larger customer base," added Nithin Kamath, founder and CEO, Zerodha.
As part of the new loan offering, the company would extend financing facility against custom
ers' investment portfolio and charge an interest rate anywhere between 12-13 per cent.
"Loan against securities is a natural extension to our retail brokerage business, and at present we are putting our own capital for this type of lending. If a consumer has investments worth ₹1 lakh in the market, we can provide them loans against 60% of their portfolio," Kamath added.
With the Covid 19 crisis, there has been seen an increasing interest from retail investors who are now taking a plunge into the stock markets for the first time. Likewise, Zerodha is also seeing an uptick in first-time users. At present, the company is seeing a phenomenal increase in new accounts on a month on month basis which is currently at 2.5 lakh as against 80000 during the last quarter of CY 2019.
In the month of January there was this IPO of SBI Card which drew much of investors' interest. Usually when there is a large IPO, more users get interested to invest," explains Kamath. And another reason as cited by Kamath for renewed interest into capital markets is the low interest regime, wherein interest rates on fixed income products including the likes of bank FD are now trending lower.
Also the brokerage house in February this year applied for an AMC license but the processing of the same is taking time due to Covid 19. The company also has its direct mutual fund platform by the name ' Coin' with a total asset size of Rs. 7000 crore.
Furthermore, the company is working on a platform to allow users to invests in US securities but currently is on its work to solve the remittance issue, with product expected to be launched by the year end.