Smart investors have a thing for making a killing. Their investments always outpace what a paltry bank savings account pays. Some of them go a step further and borrow against their investments to further invest and earn a handsome profit. Loans against shares have been in existence for long, but the process of borrowing against them was tedious.

Lengthy queues, filling up interrogative forms and waiting for the loan to be sanctioned will all soon be lore from the past. Generation-Z and Millennials are in a constant dearth of time and HDFC Bank seems to very well recognise that. In an attempt to smoothen the process of loan application and approval, the privately owned bank has started offering loans against securities (LAS), such as shares, digitally. The bank has collaborated with National Securities Depository Ltd (NSDL) for execution of India’s first of its kind project.

Customers can now use shares dematerialised by NSDL and executed through HDFC Bank demat account for pledging. All that a customer needs to do is login to their bank account through the web and pledge shares dematerialised by NSDL and get instant loans deposited in a new current account. The bank, on its part, has identified more than 400 widely traded shares that are acceptable for pledging. One could borrow a minimum Rs 1 lakh, going up to Rs 20 lakh for 10.5 per cent interest at the moment.

While borrowing against your assets is convenient, be sure that it is your assets which stand as collateral, which in case of non repayment will be attached or sold to recover the outstanding loan. Many traders do use this facility, but then they are traders. If you are looking to borrow in this fashion, do so only in extreme instances, as the rate of interest on this loan is not that low either.

rounak@outlookindia.com