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What Is a Margin Call in LAMF? How to Handle It
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A margin call happens when NAV declines push LTV beyond limits; respond quickly by adding collateral, repaying partially, or risk forced liquidation.
A margin call in a Loan Against Mutual Funds (LAMF) arises when the NAV of pledged units falls, pushing the loan-to-value (LTV) ratio above the lender’s permitted limit. For example, borrowing ₹5 lakh against ₹10 lakh NAV (50% LTV) becomes risky if NAV drops to ₹8 lakh, raising LTV to 62.5%. The lender then demands corrective action—either pledging more units, repaying part of the loan, or adding cash collateral. Failure to respond can result in forced unit liquidation at market value.