Federal Bank Loan Against Mutual Funds: Interest Rates & Eligibility
Mutual fund portfolios are built with a long horizon in mind, but financial needs rarely follow a schedule. Whether it is a medical emergency, a business shortfall, or a large one-time expense, liquidating your portfolio early can disrupt years of compounding. A Loan Against Mutual Funds lets you access liquidity by pledging your units as collateral, keeping your investments intact while you meet your needs.
Not all lenders offering this product do so in the same way. In this article, we look specifically at what Federal Bank offers in its securities lending portfolio and how smallcase’s LAMF product through Bajaj Finance serves as a digital alternative for investors comparing their options.
What is a Loan Against Mutual Funds (LAMF)?
A Loan Against Mutual Funds (LAMF) is a secured borrowing facility where you pledge your mutual fund units as collateral in exchange for a credit line. Since the loan is backed by your investments, you do not need to sell them to raise money.
How Does It Work?
- You select mutual fund units from your existing portfolio and offer them as collateral. The lender marks a lien on the chosen units through CAMS or KFintech for non-demat folios, or through the depository for demat-held units.
- Your credit limit is calculated as a percentage of the current market value of the pledged units, based on the applicable LTV ratio. Equity mutual funds attract a lower LTV compared to debt funds, since equity NAVs are subject to sharper short-term swings.
- The credit line works like an overdraft. You draw only what you need, and interest accrues only on the amount outstanding, not on the total sanctioned limit.
- Throughout the loan tenure, your units stay invested. SIPs, NAV appreciation, and dividend payouts continue unaffected. The lien from your mutual fund units is removed once all dues are cleared.
Does Federal Bank Offer Loans Against Mutual Funds?
Federal Bank is a scheduled commercial bank based in Kerala with a presence across retail and business banking. It offers a securities lending product covering listed equity shares. This falls under the broader category of a Loan Against Securities (LAS).
Federal Bank’s Loan Against Securities
The table below captures what is publicly available about Federal Bank’s Loan Against Shares product, based on their official product page:
| Collateral type | Listed equity shares in demat form |
| LTV | Up to 50% of the value of pledged securities |
| Minimum loan amount | Rs. 1 lakh |
| Maximum loan amount | Rs. 20 lakhs overall; Rs. 3 lakhs against a single scrip, sector, or company |
| Interest accrual | Charged only on the amount actually drawn |
| Account requirement | Demat account with Federal Bank for branch-based applications; Pledge Master Report from external DP otherwise |
| Application channel | Branch visit required; no dedicated digital application noted on the product page |
| Interest rate | Not publicly stated; contact Federal Bank directly for current rates |
Disclaimer: The above is based on Federal Bank’s public product page as of May 2026. Features, rates, and eligibility are subject to change without notice.
Loan Against Mutual Funds on smallcase
smallcase offers a Loan Against Mutual Funds in partnership with Bajaj Finance Limited. The product is built for investors who want a fully digital experience without needing a pre-existing relationship with any particular bank.
Once you log in, head to the Credit section and select Loan Against Mutual Funds. The platform pulls your holdings from CAMS via your registered email and from KFintech via your registered phone number. From there, you pick the units you want to pledge, set your loan amount, link a bank account, authorise an eMandate for interest payments, complete a quick Video KYC, and sign the agreement online. The funds are typically credited to your account within 2 working hours of signing.
Your portfolio keeps working throughout the loan period. Dividends are credited as usual, NAVs move freely, and your mutual fund SIP instalments are not affected by the lien on existing units.
How to Apply for a Loan Against Mutual Funds?
Here is the step-by-step process to get a LAMF on smallcase:
- Visit smallcase Credit and select Loan Against Mutual Funds to see your eligible credit limit.
- Review your eligible holdings and the schemes available for pledging.
- Choose which fund units to pledge and confirm the credit limit that gets unlocked.
- Add your bank account for disbursement and set up an eMandate for monthly interest auto-debit.
- The lien on your selected units is marked digitally while they remain in your folio or demat account.
- Review the loan agreement, enter the OTP to authenticate, and sign online.
- Once the agreement is signed, the loan amount is credited to your bank account within 2 working hours.
Eligibility and Documents for LAMF on smallcase
Applying for LAMF on smallcase requires meeting basic KYC and portfolio-related criteria. Here is a quick overview of eligibility and the documents required for LAMF.
| Criteria | Requirement on smallcase |
|---|---|
| Residency | Resident Indian |
| Age | 18 to 70 years |
| Employment type | Salaried or self-employed; no profession restrictions |
| Account type | Individual account only; joint folios are not eligible |
| PAN | Active PAN card |
| Existing bank account requirement | None; no account with any specific bank is required |
Type of Securities Required to Apply for a Loan Against a Mutual Fund on smallcase
- Non-demat units from funds registered with CAMS or KFintech. The email linked to CAMS folios and the phone linked to KFintech folios are used to fetch holdings.
- Demat mutual fund units held in a Zerodha account can also be pledged.
- ELSS units qualify only after each instalment completes its individual 3-year statutory lock-in.
- Schemes must appear on Bajaj Finance’s approved list. You can see which of your holdings qualify directly in the smallcase app when you import them.
Things to Consider Before Applying for LAMF
Process Timelines Can Vary
How quickly funds are disbursed varies from lender to lender. On smallcase, you typically receive the money within 2 working hours of completing the agreement. The turnaround at a bank depends on its internal processes and the channel you use. If timing is critical, confirm the disbursement window before you commit to any lender.
Eligible Securities May Differ Across Lenders
Every lender runs its own approved list of acceptable fund schemes. A fund that qualifies at one institution may not pass the cut at another. On smallcase, the approved list for securities for LAMF is updated automatically when you pull in your holdings. You can also browse the full list of eligible funds here.
Terms Depend on Lender-Specific Policies
Interest rates on LAMF, LTV ratios, fees, and margin call windows are all lender-determined. The effective cost of borrowing goes beyond just the interest rate. A lender charging no upfront fee but a higher rate may end up costing more than one with a nominal processing charge and a lower rate, depending on how long you keep the loan outstanding.
Monitoring of Pledged Assets Is Required
Your credit limit is recalculated daily based on the current NAVs of your pledged funds. If a market dip pushes your outstanding balance above the permitted LTV, the lender will issue a margin call. On smallcase, you get a 7-day window to either repay the shortfall or top up the collateral. Ignoring a margin call can trigger an automated liquidation of part of your pledged units. Keep a regular eye on your loan dashboard, particularly when markets are volatile.
Interest Rates, Fees, and Charges for Loan Against Mutual Funds
The charges below apply to LAMF on smallcase through Bajaj Finance Limited. Federal Bank’s interest rate on securities lending is not publicly listed; speak to the bank directly for a quote.
| Charge | smallcase LAMF | Notes |
|---|---|---|
| Interest rate | 9.99% p.a. on outstanding drawn amount | Accrued daily on the drawn balance only, not on the full credit limit |
| Processing fee | Rs. 999 or 1% of the loan amount (whichever is higher), capped at Rs. 4,999 + GST | One-time charge deducted at the time of loan sanction |
| Late payment interest | 1.5% per month on overdue interest | Kicks in if the monthly interest debit is not cleared on the due date |
| Bounce charge | Rs. 1,200 per instance | Levied each time the auto-debit mandate returns unpaid |
| Foreclosure charge | Nil | Close the loan early at any point without any penalty |
| Part-prepayment charge | Nil | Partial principal repayments can be made at any time without charges |
| Demat pledge charge | Rs. 50 + GST (lender) and Rs. 32 + GST (Zerodha) per security | Only for demat units; no pledge charge for CAMS or KFintech folio units |
Tip: Before drawing from your credit line, use the LAMF interest rate calculator to estimate your monthly interest outgo and total repayment cost based on the amount you plan to draw and your expected repayment timeline.
Disclaimer: Charges above reflect the smallcase LAMF product as of May 2026 and are subject to change. Always read the loan agreement before signing.
LTV by Fund Type on smallcase
The loan-to-value (LTV) ratio is the percentage of your pledged fund’s current market value that translates into your credit limit. On smallcase, the LTV differs by fund category:
| Fund Type | LTV / Eligible Loan Amount |
|---|---|
| Equity mutual funds | Up to 45% of the current market value |
| Debt mutual funds | Up to 75% of current market value (maximum LTV can go up to 85%) |
To Wrap It Up…
Federal Bank provides a Loan Against Shares product under its securities lending portfolio for customers with listed equity holdings. Based on what is publicly available on their website, a dedicated Loan Against Mutual Funds product is not currently listed. If you want to explore pledging mutual fund units with Federal Bank, contact them at 1800-425-1199 or visit a branch to understand what is available and on what terms.
For investors who prefer a fully digital LAMF with no branch visit, no specific bank account requirement, and a fixed interest rate of 9.99% p.a., smallcase offers this through Bajaj Finance. Your eligibility is assessed on the basis of your portfolio, not your income
.
Before settling on any option, go through the approved list of eligible schemes, understand how the LTV and margin call mechanics work, and factor in all costs, including interest, statutory levies, and other applicable charges. Check out Loan Against Mutual Fund and Loan Against Stocks on smallcase to explore your options.
Frequently Asked Questions on Federal Bank Loan Against Mutual Funds
Federal Bank offers a Loan Against Shares under its securities lending portfolio, but does not publicly detail a standalone Loan Against Mutual Funds product as of May 2026.
Disclaimer: The information above is based on publicly available data as of 14th May 2026. Loan products, eligibility criteria, and lending offerings may change over time. Borrowers should verify the latest details directly with Federal Bank before applying.
Based on publicly available information, Federal Bank’s Loan Against Shares product accepts listed equity shares held in demat form. Its separate loan against liquid securities offering covers fixed deposits, NSC, government securities, and LIC policies. Accepted collateral types may vary by product and borrower profile.
Disclaimer: Collateral eligibility can change over time. Borrowers should confirm the latest accepted securities directly with Federal Bank before applying.
Federal Bank’s Loan Against Shares offers loan amounts from ₹1 lakh to ₹20 lakh. The product also mentions a ₹3 lakh cap per single scrip, sector, or company, and an LTV of up to 50% of the pledged security’s current value.
Disclaimer: These details are based on publicly available information as of 14th May 2026. Loan limits, LTV, eligibility, and collateral rules may be revised by the bank.
Federal Bank does not publicly disclose a fixed interest rate for its Loan Against Securities product. The applicable rate may depend on the borrower profile, loan amount, collateral type, and bank policy.
Disclaimer: Borrowers should confirm the current rate and charges directly with Federal Bank before applying.
smallcase offers LAMF through Bajaj Finance with interest rates starting at 9.99% p.a. on the amount drawn. Interest is calculated only on the outstanding balance, so borrowers pay interest only on the amount used and for the period it remains outstanding.
Disclaimer: The rate mentioned is based on publicly available information as of 14th May 2026. Borrowers should check the latest terms on the smallcase platform before applying.
No, income documents such as salary slips, ITR, or bank statements are not required. Since the loan is secured against mutual fund units, eligibility is based on the investor’s portfolio rather than income.
A fall in NAV reduces the value of pledged collateral and may lower the eligible credit limit. If the amount drawn exceeds the revised limit, a margin call may be triggered. On smallcase, borrowers get 7 days to restore the required LTV by repaying the excess amount or adding more eligible collateral. If the shortfall remains unresolved, the lender may redeem part of the pledged units to recover the outstanding amount.
Yes, the pledge applies only to the mutual fund units selected during the loan application. New units created through ongoing SIP instalments are not automatically covered under the lien and continue to accumulate in the folio.
Borrowers need an active PAN card, the email address registered with CAMS-serviced folios, and the phone number registered with KFintech-serviced folios. No proof of income or physical paperwork is required. The application and disbursement process is fully digital.
