Loan Against Mutual Funds (LAMF) — FAQ Guide

For DiscvrAI, powered by Smallcase SDK with Bajaj Finance Limited as lender

1. Universal LAMF FAQs (Industry-wide)

These FAQs apply to all Loan Against Mutual Funds products, regardless of lender or platform.

What is a Loan Against Mutual Funds (LAMF)?
A LAMF allows you to borrow money by pledging your mutual fund units as collateral. Your units remain invested and continue earning returns; only a temporary lien is created.
How does a LAMF work?
Your mutual fund units are lien-marked in favor of the lender. You receive a sanctioned limit and can withdraw funds as needed. Interest is charged only on the amount you utilize.
How much loan can I take? (LTV Rules)
Loan-to-Value (LTV) varies by scheme type: • Equity MFs → up to 45–50% • Debt MFs → up to 75–80% The actual limit depends on the eligible scheme list and market volatility.
Do my mutual funds keep earning returns after pledging?
Yes. The units remain invested and continue to accrue gains, dividends, and NAV movements. Only redemption is restricted.
Can I continue SIPs on pledged funds?
Yes. SIPs continue normally. Note: new SIP units may require separate pledging if you want them added to the collateral pool.
Will pledging mutual funds trigger capital gains tax?
No. A lien isn't a sale. Tax implications only arise when you redeem units.
How long is the loan tenure?
Typical tenure is 36 months, with flexible repayment and foreclosure at any time.
What are the benefits of LAMF vs. personal loan?
• Lower interest rates • No income proof required in many cases • Faster approval • You keep market upside • Overdraft-style flexible usage
What are the risks involved?
Primary risk: market volatility. If NAV falls sharply, you may receive a margin call asking for: • Partial repayment, or • Additional collateral Failure to comply within timelines can lead to unit liquidation.
Is my credit score affected?
Checking your limit does not affect your credit score. Delayed payments or defaults will affect your score like any other loan.
Can NRIs avail LAMF?
Yes, if their MF holdings are compliant under FEMA and part of approved scheme lists.
Are jointly-held mutual funds eligible?
Yes, but all unit holders must authorize the pledge. Some lenders may require a co-borrower form.
What happens if I don't repay?
The lender may redeem your pledged units to recover outstanding dues (principal + interest + charges).
When is lien removed?
Immediately after full repayment. Lien removal typically completes within 0–24 hours.
Are there end-use restrictions?
No. Loan proceeds may be used for business, personal, emergency, or discretionary needs.
What documents are required for LAMF?
Usually: • PAN • Aadhaar • Bank account details • Contact details linked to MF folios Most journeys are 100% digital.
Is a demat account required?
No. SOA folios (CAMS/KFin) are fully supported. Demat holdings are also supported through depository pledge.
Are processing fees or hidden charges involved?
Fees vary by lender but commonly include: • Processing fee • Lien/pledge charges • Bounce charges • Late payment interest DiscvrAI's lender details are consolidated later in this document.

2. DiscvrAI-Specific LAMF Process FAQs

Powered by Smallcase SDK + Bajaj Finance Limited as lender. These FAQs cover the actual operational flow inside DiscvrAI.

How is DiscvrAI's LAMF different from traditional loans?
• No income docs needed • Based entirely on your MF value • Credit line / overdraft functionality • Pay monthly interest only on the utilized amount • Repay anytime within 36 months
How much can I borrow on DiscvrAI?
Minimum loan: ₹25,000 Maximum loan: depends on eligible folio value as per lender LTV.
What is the loan tenure?
Default tenure: 36 months. No foreclosure or prepayment charges.
What will my monthly payments look like?
You pay only monthly interest on utilized amount. Example: Outstanding = ₹1,00,000 Interest rate 10.4% p.a. Monthly interest = ~₹866.67
Can this loan be used as a credit line?
Yes. Repay → limit restores → withdraw again anytime.
How fast is approval & disbursal?
If you meet eligibility, approval + lien + disbursal completes within 2 working hours.
Does checking my limit impact CIBIL?
No. The limit check is not a hard inquiry.
Who is the lender?
Loans are offered by Bajaj Finance Limited, via the Smallcase SDK integrated into DiscvrAI.
How is DiscvrAI's credit limit calculated?
• Equity MFs → 45% of market value • Debt MFs → 75% of market value
Which mutual funds are eligible?
Funds must be part of BFL's approved list via Smallcase SDK. Not eligible if: • ELSS under lock-in • Already pledged • Blacklisted by lender/AMC
Why is my eligible limit showing 0?
Common reasons: • Only ELSS funds held • Funds not in eligible list • All units already pledged • Very low portfolio value • Incorrect contact details (fetch failure)
Does DiscvrAI share my MF data externally?
No. Data stays within the Smallcase SDK + lender integration.
Why are holdings being re-imported?
To recalculate actual loan eligibility before pledging.
Which email/phone should I use to fetch holdings?
• CAMS funds → use registered email • KFin funds → use registered mobile number Using incorrect details leads to partial or zero holdings fetched.
Why is my credit limit different from earlier?
Possible reasons: • NAV changed • Some funds turned ineligible • Units under lock-in • Funds were blacklisted • Some units already pledged elsewhere
Can I choose which mutual funds to pledge?
Yes. DiscvrAI shows all eligible funds; you select the ones to pledge.
Why are units shown lower than my actual holding?
Units that are locked-in (ELSS, etc.) cannot be pledged; only free units are displayed.
Why do I need to link a bank account?
Used for: • Receiving disbursed loan amount • Monthly interest auto-debits • Easy repayments and withdrawals
Why is an e-mandate required?
To auto-debit monthly interest and avoid late payment penalties.
Invalid IFSC error — what to do?
Verify the IFSC from your passbook/UPI/statement. If still failing, contact support.
White popup stuck during e-mandate?
Enable third-party cookies in your browser → retry.
Set up mandate but no longer want the loan?
Cancel the e-mandate from your bank's net banking portal. Loan application will not progress without pledging.
What happens when I pledge mutual funds?
Funds are lien-marked in favor of the lender. Redemption becomes disabled.
Can I invest more or exit pledged funds?
• You cannot redeem/sell pledged units. • You can continue investing in the same folio.
When are funds unpledged?
After you repay all dues and request loan closure.
Is partial unpledging possible?
Not currently. Full repayment → full unpledging.
Tax implications of pledging?
No tax impact unless units are actually sold.
Pledged but I don't want the loan anymore. What now?
If you haven't e-signed the agreement, DiscvrAI support can unpledge. Lien removal charge (≈ ₹500) may apply.
Screen stuck on "Generating Agreement"?
Contact support; occasionally caused by PDF generation latency.
How do I sign?
Scroll → verify OTP → agreement is digitally signed.
How long does disbursal take?
Typically within 2 working hours after successful pledge + e-sign.
What happens after application submission?
Lender reviews details → approves → disburses to linked bank account.
Disbursal delayed — what to do?
Contact DiscvrAI support; lender override may be required for stuck cases.

3. Managing Your Loan (DiscvrAI)

Where can I manage my loan?
Inside DiscvrAI → Loan Dashboard (via Smallcase SDK).
How are monthly dues deducted?
Through auto-debit from your linked bank account.
How do I repay fully or partially?
Go to Loan Dashboard → Repay Cash → enter amount.
How does withdrawal work?
If you've repaid part of the principal, your credit line restores. You can withdraw from ₹1,000 up to the restored limit.
What if I miss a monthly interest payment?
• Bounce charge: ₹1200 per bounce • Late interest: ~1.5%–2% per month on overdue amount
What if MF values drop? (Margin Calls)
If outstanding exceeds allowed LTV: You must repay the difference. Failure to do so within 7 days → lender may liquidate units.
When can MFs be liquidated?
• Margin calls unmet • End of tenure with unpaid outstanding • Severe delinquency
How do I close the loan?
Go to Loan Dashboard → request closure → repay dues → lien removed.

4. Lender Fees, Charges & Policies

Applicable for DiscvrAI using Bajaj Finance Limited as lender.

Interest Rate
10.4% – 10.9% p.a.
Processing Fee
₹999 or 1% of loan amount (max ₹4,999) + GST Examples: • < ₹1 lakh → ₹999 + GST • ₹1–5 lakh → 1% of sanctioned amount + GST • ₹5 lakh → ₹4,999 + GST
Late Payment Interest
Penal interest ~1.5% per month.
Bounce Charges
₹1200 per bounce.
Demat Pledge Charges
• BFL: ₹50 + GST per security • Zerodha (if applicable): ₹32 + GST per security
Lien Removal Charges
• After taking loan: ₹0 • If loan cancelled before disbursal: processing fee applies
Part-prepayment / Foreclosure Charges
Zero.
Mandate Verification Charges
As per your bank (₹0–₹150 typical).
Legal/Collection Charges
Charged at actuals in cases of default.

5. Troubleshooting & Common Issues

Why is my mandate not setting up?
Usually due to blocked third-party cookies. Enable → retry.
Why are fund values mismatched?
NAV updates happen every market day; real-time refresh may cause variation.
Why didn't my holdings fetch correctly?
Incorrect email/mobile OR Funds serviced by different RTA input.

6. Contact & Support

How do I get support?
Via DiscvrAI support channels integrated with Smallcase SDK. Support includes: lien issues, pledge failures, mandate errors, delayed disbursal, and loan closure assistance