The modern investor understands that wealth is not just about accumulation but also about liquidity. In the past, the only way to access cash from your portfolio was to sell your units, which often meant sacrificing long-term compounding and paying capital gains tax. Today, lending against securities has emerged as a sophisticated alternative, allowing you to unlock capital while keeping your assets intact. By opting for a loan against mutual funds, you can navigate financial emergencies or seize new opportunities without derailing your financial roadmap.
Lenders and NBFCs maintain a rigorous "Approved List" of schemes that qualify as collateral. Generally, equity-oriented funds allow you to borrow up to 50% of their current value, while debt-oriented mutual funds eligible for LAMF can offer up to 75% or 80% leverage. Below, we explore the top 10 mutual funds that are almost universally accepted by Indian lenders for this purpose.
Top 10 Mutual Funds for Lending Against Securities
Every lender has its own risk appetite, but certain funds consistently appear on the approved lists of major banks and digital platforms. These funds are selected based on their high Asset Under Management (AUM), lower volatility, and strong track record.
1. SBI Bluechip Fund
This fund is a cornerstone in the world of lending against securities. As a large-cap fund investing in India's biggest companies, it offers the stability that lenders crave. When you check mutual fund loan eligibility for this scheme, you will find that most lenders offer the maximum permissible 50% LTV (Loan-to-Value) because the underlying assets are highly liquid and stable market leaders.
2. HDFC Flexi Cap Fund
The HDFC Flexi Cap Fund is one of the most popular mutual funds eligible for LAMF due to its veteran status and consistent performance across market cycles. Because it can move across market caps, it provides a diversified collateral base. Lenders view this fund as a low-risk asset, making a loan against mutual funds backed by this scheme easy to approve.
3. ICICI Prudential Bluechip Fund
Focusing on the top 100 companies by market capitalization, this fund is a favorite for lending against securities. Its portfolio consists of high-liquidity stocks, which means the lender can easily recover the loan amount if necessary. This liquidity ensures that when you apply for a loan against mutual funds, the lien-marking process is often instantaneous and fully digital.
4. Mirae Asset Large Cap Fund
Mirae Asset has built a reputation for disciplined fund management, making its Large Cap Fund a top choice for lending against securities. Lenders appreciate the fund’s risk-adjusted returns. If you hold units in this scheme, you can check mutual fund loan eligibility and find that it is part of the "A-category" list for almost every major NBFC and bank in India.
5. Parag Parikh Flexi Cap Fund
This fund is unique among mutual funds eligible for LAMF because of its international exposure. While lenders primarily value the domestic equity portion, the overall stability of the fund makes it a highly accepted collateral for lending against securities. It is an ideal choice for a loan against mutual funds for those who want to maintain their exposure to global markets while getting domestic liquidity.
6. Axis Midcap Fund
Mid-cap funds are generally more volatile, but the Axis Midcap Fund is often an exception on approved lists for lending against securities. Its high AUM and focus on quality growth stocks provide a level of comfort to lenders. When you seek a loan against mutual funds using this scheme, you get the benefit of high growth potential while satisfying the lender's security requirements.
7. Kotak Emerging Equity Fund
As one of the largest mid-cap funds in India, it is a staple in the list of mutual funds eligible for LAMF. Lenders often include this fund to cater to investors who have substantial holdings outside of large-caps. Using this fund for lending against securities allows you to tap into the value of your mid-cap winners without having to exit your positions prematurely.
8. SBI Equity Hybrid Fund
Hybrid funds are highly valued for a loan against mutual funds because they contain both equity and debt. The SBI Equity Hybrid Fund, specifically, is a top-tier asset for lending against securities because its debt component acts as a stabilizer during market downturns. This reduced volatility means your loan is less likely to face "margin calls" during a market correction.
9. Nippon India Small Cap Fund
While most small-cap funds are excluded from lending against securities, Nippon India Small Cap is often included due to its massive scale and longevity. It is one of the rare small-cap mutual funds eligible for LAMF. However, borrowers should check mutual fund loan eligibility carefully, as some lenders might apply a higher margin (lower LTV) for small-cap assets to account for price swings.
10. HDFC Top 100 Fund
This fund represents the "blue-chip" of the mutual fund world, making it a perfect candidate for lending against securities. Its institutional-grade portfolio is highly liquid. When pledging units of this fund for a loan against mutual funds, you are likely to get the best interest rates because the lender perceives the risk to be significantly lower compared to thematic or sectoral funds.
How to Check Mutual Fund Loan Eligibility
Before you apply for a loan, it is essential to check mutual fund loan eligibility to understand how much capital you can actually access. The eligibility depends on three main factors: the type of fund (Equity vs Debt), the current market value of your holdings, and whether the fund is on the lender's approved list.
Most modern platforms allow you to check mutual fund loan eligibility by simply entering your PAN or fetching your consolidated account statement (CAS). This digital "handshake" with the RTAs (CAMS or KFintech) provides an instant valuation of your mutual funds eligible for LAMF.
Eligibility and LTV Comparison Table
Fund Category | Typical LTV (%) | Suitability for Lending |
Large Cap Equity | 50% | High - Highly accepted for lending against securities. |
Flexi Cap / Multicap | 45% - 50% | High - Great for diversified loans against mutual funds. |
Mid Cap | 40% - 45% | Moderate - Subject to AUM and lender approval. |
Hybrid / Balanced | 50% - 60% | High - Stable collateral for lending against securities. |
Debt / Liquid Funds | 70% - 80% | Very High - Best for maximizing a loan against mutual funds. |
Benefits of Using Mutual Funds Eligible for LAMF
Utilizing mutual funds eligible for LAMF as collateral is far superior to taking an unsecured personal loan. In a personal loan, the interest rates are high because there is no security. With lending against securities, the interest rates are significantly lower, often starting as low as 9%.
Furthermore, a loan against mutual funds is usually structured as an overdraft. This means you only pay interest on the money you use. If you have a limit of ₹10 lakhs but only withdraw ₹2 lakhs for 15 days, you only pay interest on that ₹2 lakhs for those 15 days. This makes lending against securities a very cost-effective way to manage short-term cash flow gaps.
Why Choose Pledging Over Selling?
Tax Efficiency: Selling triggers capital gains tax; lending against securities does not.
Continued Returns: Your units stay invested and keep earning dividends and growth during the loan against mutual funds.
Zero Prepayment Charges: Most LAMF products allow you to close the loan anytime without a penalty.
Instant Processing: If you have mutual funds eligible for LAMF, the money can be in your account in minutes.
Strategic Steps to Avail a Loan Against Mutual Funds
To ensure a smooth experience, you should follow a structured approach. First, you must check mutual fund loan eligibility to see which parts of your portfolio can be leveraged. Not all funds in your folio might be mutual funds eligible for LAMF, especially if they are ELSS funds still within their 3-year lock-in period.
Once you have identified your eligible assets, the process of lending against securities involves "lien marking." This is a digital instruction to the mutual fund house that the units are pledged to a lender. While the lien is active, you cannot sell those units, but you still own them. After you repay the loan against mutual funds, the lien is removed, and you regain full control over your units.
Conclusion
Mastering the art of lending against securities is a game-changer for any serious investor. It transforms your portfolio from a static "future-only" asset into a dynamic financial tool that can provide liquidity today. By focusing on the top 10 funds mentioned above, you increase your chances of securing a high-limit loan against mutual funds with ease.
Always remember to check mutual fund loan eligibility periodically, as market fluctuations change your borrowing power. If you are ready to unlock the true potential of your investments, visit discvr.ai to explore our LAMF product. We provide a seamless, digital journey to help you find the best mutual funds eligible for LAMF and get the capital you need without ever hitting the "sell" button.