How much can you borrow against mutual funds? There is no universal amount. In India, a lender normally starts with the current value (NAV) of eligible units, applies a category-specific loan-to-value (LTV) or haircut, and then applies its own loan cap, scheme rules and maintenance requirements. The amount you can actually draw may therefore be lower than the headline percentage.
State Bank of India (SBI) provides a useful, explicitly lender-specific example: its published margin is 50% for equity, hybrid and ETF funds (up to 50% of NAV) and 25% for debt and fixed-maturity-plan (FMP) funds (up to 75% of NAV). Those figures are not a market-wide promise, and SBI’s own page contains different equity-loan caps for different sections and channels.
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What determines the amount you can borrow?
A loan against mutual funds (LAMF) is secured by a pledge or lien over your units. The lender does not generally lend the entire portfolio value because the units can fall in price, become difficult to liquidate, or incur selling costs. It therefore recognizes an eligible collateral value and lends only a percentage of it.
The practical estimate is:
Pre-cap borrowing limit = lender-recognized NAV of eligible units × permitted LTV
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The final sanctioned or drawable amount is the lower of that result and the lender’s absolute cap, channel cap and any account-level limit. Eligibility of the scheme, the valuation time, the way units are held and the lender’s ongoing margin test can all reduce availability.
LTV, margin and haircut
LTV is the proportion of collateral value that may be borrowed. A margin or haircut is the portion withheld as protection. In a simple structure, a 50% haircut or margin leaves a maximum LTV of about 50%; a 25% haircut leaves about 75%. That conversion is only a starting point. Lenders may use different valuation dates, eligible-scheme lists, rounding methods and maintenance rules, so “haircut” is not a universal calculation.
For example, if a lender recognizes ₹10 lakh of eligible units and permits 50% LTV, the pre-cap limit is ₹5 lakh. At 75% LTV, it is ₹7.5 lakh. An absolute cap, an ineligible holding or a subsequent NAV fall can make the usable amount smaller.
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SBI’s published figures: an example, not a universal Indian rule
SBI’s mutual-fund loan page, last updated February 13, 2026, publishes the following terms. They apply only where the applicant, channel and pledged schemes satisfy SBI’s conditions.
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| Fund category | Published margin | Implied maximum against NAV | Published cap |
|---|---|---|---|
| Equity, hybrid and ETF funds | 50% | Up to 50% of NAV | ₹20 lakh in the feature list; the FAQ and digital-channel guidance state ₹10 lakh |
| Debt and FMP funds | 25% | Up to 75% of NAV | ₹5 crore |
| All covered categories | Must be maintained throughout the loan | Subject to scheme eligibility and recognized NAV | ₹25,000 minimum loan |
The equity cap is an important qualification. SBI’s feature list displays a ₹20 lakh maximum for equity, hybrid and ETF funds, while its FAQ separately says ₹10 lakh and its online/YONO/Internet Banking guidance caps digital equity borrowing at ₹10 lakh. The public page therefore does not establish one unambiguous equity limit. Confirm the applicable cap for the branch or digital channel before relying on an estimate.
SBI says eligible schemes are from asset-management companies registered with CAMS and that its FAQ covers 20 AMCs, including SBI Mutual Fund. That is a product-specific list, not a rule that every lender accepts every CAMS-registered scheme.
Worked examples: turning NAV into a realistic estimate
Equity, hybrid or ETF units
Suppose SBI recognizes ₹10 lakh of eligible equity units. Applying its published 50% LTV produces a ₹5 lakh pre-cap limit. The relevant SBI cap and channel rule then apply. If the digital ₹10 lakh cap is applicable, it does not reduce this particular ₹5 lakh estimate; a larger portfolio could be restricted by the cap even though the percentage calculation produces more.
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If the recognized value is ₹10 lakh in eligible debt or FMP units, the published 75% LTV produces a ₹7.5 lakh pre-cap limit. The ₹5 crore category cap is far above this example, but it would constrain a much larger pledge. Scheme eligibility and the lender’s valuation still matter.
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Why your portfolio statement may overstate collateral
Your account statement can show a higher total than the lender recognizes. Units may be excluded because the scheme is outside the approved list, the holding format does not meet the lender’s requirements, identity details do not match, or the lender uses a different valuation time. Ask for the lender’s eligible-unit list and recognized NAV rather than multiplying the entire portfolio by an advertised percentage.
How the facility works after approval
SBI describes the product as an overdraft secured by lien-marked mutual-fund units. You can draw when needed, and interest is charged on the amount actually used rather than automatically on the full sanctioned limit. The units remain invested while pledged, so their value can rise or fall and any investment return is not guaranteed.
The facility is intended for general personal contingencies. SBI excludes speculative use and borrowing to subscribe to or increase another mutual-fund scheme or to purchase shares, debentures or bonds. Read the sanction letter for the permitted-use wording of the lender you choose; a general-purpose label does not override exclusions.
Eligibility and application steps in SBI’s example
SBI’s published requirements include being an individual older than 18 and having a steady income source. The online route has additional holding and identity conditions.
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- Check the scheme. Confirm that every proposed fund appears on the lender’s eligible list and that the units can be lien-marked through the lender’s transfer or registrar process.
- Check ownership details. For SBI’s online route, bank and CAMS holdings must be in a single name, with identical PAN, mobile number and email details. Joint holders are directed to use a branch.
- Estimate recognized value. Obtain the lender’s current NAV or collateral value, then apply the category LTV and the relevant absolute or channel cap.
- Submit the pledge request. Complete the lender’s online, YONO/Internet Banking or branch process as applicable. The lien or pledge must be recorded before the limit is usable.
- Review the sanction terms. Check the approved limit, floating-rate basis, reset date, fees, interest-servicing schedule, maturity date and margin-enforcement language.
- Draw only what you need. Because the facility is an overdraft, unused sanctioned capacity does not attract the same utilized-balance interest described by SBI, but account fees and renewal conditions can still apply.
Interest, fees and repayment terms
SBI’s product page says the term can run up to 12 months, monthly interest must be serviced, principal is due by or before maturity, and there is no prepayment penalty. It lists a processing fee of 0.50% plus GST, subject to a minimum of ₹500 and a maximum of ₹5,000. It also lists an annual review or renewal charge of ₹1,000 plus applicable service tax.
The published interest information is inconsistent across SBI pages:
| Published figure | Effective date | Page detail | How to use it |
|---|---|---|---|
| 11.50% per year, floating | April 1, 2025 | Shown on the mutual-fund product page; one-year reset stated | Historical published figure, not confirmed as the live applicant rate |
| 9.95% | August 15, 2025 | Shown in a separate SBI interest-rate schedule last updated December 16, 2025 | Another historical published figure; it conflicts with the product page |
Do not assume either number is the rate you will receive. Ask SBI for the current rate, benchmark, spread, reset mechanics and final sanction terms on the date you apply. A floating rate can change during the loan even if the collateral value does not.
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The LTV is not calculated once and forgotten. SBI says the required margin must be maintained for the full tenor. If the collateral value falls enough to breach that requirement, the account may need additional repayment or margin restoration. The lender may liquidate enough lien-marked units to regularize the account.
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The contract sequence is therefore:
- the fund’s NAV declines;
- the collateral cushion narrows while the drawn balance may remain unchanged;
- you may need to repay part of the balance or provide additional acceptable collateral;
- if the account is not regularized under the lender’s terms, units can be sold.
SBI’s public description does not state a universal maintenance-call deadline, grace period or valuation formula. Obtain those operational details in writing. At maturity, SBI says it may invoke or encash pledged units and apply the proceeds to unpaid dues, crediting any surplus to the linked deposit account. Continued investment exposure does not eliminate the possibility of a forced sale or a loss in the fund itself.
How to compare an LAMF offer
One percentage is not enough to compare lenders. Use the following checklist for every offer:
| Comparison point | Questions to ask |
|---|---|
| Eligible schemes and valuation | Which AMCs and schemes qualify? What NAV, valuation time and unit type are used? |
| LTV or haircut | Does the percentage vary by equity, hybrid, ETF, debt or FMP category? Is it an initial limit, a maintenance requirement or both? |
| Absolute and channel caps | What are the minimum and maximum amounts? Does online borrowing have a lower cap than branch borrowing? |
| Rate structure | Is the rate fixed or floating? What benchmark, spread and reset frequency apply? |
| Fees | What are the processing, pledge, renewal, review, statement and closure charges, including taxes? |
| Repayment | When is interest due, when is principal due, and is there a prepayment charge? |
| Margin enforcement | How is a breach communicated, how long is allowed to cure it, and when may units be sold? |
| Eligibility and use | Are single-name holdings required? Are joint holdings accepted? Which uses are prohibited? |
The available SBI material supports describing SBI’s product, but it does not establish a market average or rank Indian lenders. Treat any other lender’s LTV, fees or cap as a separate set of terms.
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Borrowing versus redeeming your units
Borrowing can provide cash without an immediate redemption, but it creates an interest-bearing liability and leaves pledged investments exposed to market declines and enforcement. Redeeming avoids loan interest and margin calls, but it reduces the investment holding and may have consequences that depend on the fund, holding period and the investor’s circumstances.
A disciplined comparison should use the amount actually needed, the expected period of use, the lender’s all-in cost, the probability of a NAV decline, and the consequences of a forced sale. Do not compare the loan rate only with an assumed future fund return: investment returns are uncertain, while interest and repayment obligations are contractual.
Common mistakes and how to avoid them
- Using total portfolio value. Recalculate using only schemes and units the lender confirms as eligible.
- Confusing the initial LTV with a permanent buffer. Ask how maintenance margin is tested after NAV changes.
- Ignoring channel limits. SBI’s equity figures differ between its feature list and FAQ/digital guidance; identify the route before applying.
- Treating a dated rate as current. SBI publishes conflicting dated rates, so obtain a live quote and sanction letter.
- Drawing the full limit unnecessarily. Interest is linked to utilization in SBI’s overdraft description, so keep the drawn balance as low and short-lived as practical.
- Waiting until maturity. Plan principal repayment before the due date; otherwise pledged units may be invoked to settle the account.
- Assuming returns are guaranteed. Pledged units remain market-linked and can lose value even while they are serving as collateral.
Bottom line
For the SBI figures published in 2026, an eligible equity, hybrid or ETF portfolio supports up to 50% of recognized NAV before caps, while an eligible debt or FMP portfolio supports up to 75%. The final amount depends on the lender’s eligible-scheme list, recognized NAV, absolute and channel caps, and ongoing margin maintenance. SBI’s public page shows a ₹20 lakh equity feature-list cap but a ₹10 lakh FAQ/digital cap, and its pages publish conflicting dated interest rates of 11.50% and 9.95%. Verify the channel, current rate and enforcement terms directly before pledging units.
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