How to get loan against mutual fund from ICICI Bank – Check features, eligibility, interest rate

Explore other options such as loan against FD, personal loan before taking a loan against MF investments.

ICICI Bank has launched a facility that will provide mutual fund investors to get a loan of up to Rs.1 crore by pledging their holdings in both debt and equity schemes of mutual funds. At the time if one is facing a short-term cash crunch, getting funds against MF investments may provide some relief. The investor need not have to sell the MF units and the loan availed is in the form of overdraft (OD). In an OD kind of loan, one pays interest only on the amount of loan used and not on the entire amount of loan.

Called, ‘Insta Loans against Mutual Funds’, it is a fully digital and paperless facility empowers the investors to avail this loan as an overdraft (OD) in a matter of few minutes, without visiting a branch and submitting physical documents.

With ‘Insta Loans against Mutual Funds’, one has the convenience to select the mutual fund scheme and the number of units they wish to pledge, confirm the loan amount and set-up the OD limit in a few simple clicks on the Bank’s internet banking platform.

Eligibility

This facility is currently available for a set of ‘pre-qualified’ account holder who has been maintaining mutual funds registered with CAMS as well as a Savings Account with ICICI Bank. It is available for resident Indians and for portfolios that are individual holdings.

Which MF schemes

This facility is available against the list of mutual funds approved by ICICI Bank and that are registered with CAMS. On taking a loan, there is a lien marked on the existing mutual funds serviced by CAMS before the sanction of the loan amount.

Rate of interest, charges

As per the website of the bank, the rate of interest is 9.90 per cent per annum for equity mutual funds and 9.40 per cent for debt mutual funds. The processing fees is Rs 500 plus Goods and Services Tax (GST).

Key features

• Instant access to funds: The customers get access to instant liquidity by leveraging their existing mutual fund portfolio, without selling them.
• Flexibility of mutual funds: The loan can be availed against a wide range of debt and equity schemes of mutual funds serviced by CAMS and approved by the Bank
• Wide range of loan amount: Minimum loan amount  is Rs. 50,000 for both debt and equity schemes of MFs. Maximum loan amount is Rs. 1 crore for debt schemes of MFs and Rs. 20 lakh for equity schemes of MFs
• Competitive margin: Minimum 20% for debt and 50% for equity MFs
• Advantage of OD; No fixed EMI: Since the loan is available as an OD, the customers do not have to pay fixed EMI. They only need to pay interest on the limit utilised and for the number of the days it was utilised
• No foreclosure charges:  The customers have the flexibility to repay the principal as and when they choose to, without any foreclosure charges

How to avail – Stepwise process

• Log in to ICICI Bank Internet Banking.
• Go to ‘Investment & Insurance’ and click on ‘Insta Loan Against Mutual Funds’
• Select the type of mutual funds that you wish to mark a lien over
• Confirm the request at CAMS portal through One-Time Password (OTP) authentication
• Read through the Insta loan terms and conditions and accept the same
• Enter the OTP received and get the loan against mutual fund Over Draft (OD) account opened instantly
• Post confirmation of lien marking, the limit will be set in relevant OD loan account
• Start using the funds.

Choose to go with the loan facility against MF units only when the funds are required over a short term. Make sure to understand the process if the market value of the units fall or increase during the period the loan is availed. Explore other options such as loan against FD, personal loan before venturing for a loan against MF investments.