Yes, you can borrow against eligible mutual fund units in India without redeeming them. Banks and digital platforms create a lien or pledge over selected units and provide an overdraft or loan against the value they accept as collateral. The practical choice is not simply the app advertising the lowest rate: it is the route that accepts your exact scheme and folio, gives a useful drawing limit, and offers acceptable interest, fees, repayment terms and lien-release conditions.
Federal Bank, ICICI Bank, HDFC Bank, SBI and Canara Bank publish digital or online routes. PhonePe has announced an in-app secured-credit facility. Availability, rates and fund coverage can change, so treat the figures below as product information published by the named providers in October 2026, not a personal offer or a permanent ranking.
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What a loan against mutual funds actually is
A loan against mutual funds (LAMF) is secured borrowing. You select eligible units already held in your name; the lender marks a lien or creates a pledge over those units; and the lender makes a credit limit available against a percentage of its assessed value. You generally keep exposure to the fund rather than selling units to raise cash, but the pledged units are encumbered until the debt and applicable charges are cleared.
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Most digital products described by the providers below are overdrafts. You draw only what you need, and some lenders state that interest is charged on the utilized amount for the period it remains outstanding. That is different from receiving the entire sanctioned limit on day one. Read the facility agreement and Key Fact Statement (KFS) to confirm whether interest is calculated on utilization, the sanctioned limit, or another balance.
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A lender can restrict additional drawings, require repayment, or enforce its security if you breach the agreement or the collateral no longer supports the required margin. A fund’s market value can also fall while it is pledged. “Not redeeming” therefore does not mean the investment is free of consequences.
Which apps and digital routes are worth checking?
There is no defensible, universal “best app.” Each route serves a particular set of account holders, fund schemes and risk rules. The providers’ published information identifies what still needs confirmation before you apply.
| Provider or route | Published digital proposition | Published rate or limit | What to verify before applying |
|---|---|---|---|
| Federal Bank | Digital overdraft against selected mutual-fund units; portfolio retrieval, unit selection and online pledge/lien process. | 9.50%–12% per annum; interest stated as applying to the amount utilized and the time it remains outstanding. | Your applicant-specific rate and APR in the KFS, eligible schemes, valuation or drawing-power formula, fees, renewal terms and release process. |
| ICICI Bank | Digital route through iMobile or NetBanking for select eligible customers. | 10.75%–11.75% per annum; digital limits stated as up to 70% of NAV for equity funds and 80% for debt funds, with a ₹1 crore digital cap. | Whether your customer segment and folio qualify, current scheme list, equity/debt classification, processing and annual-renewal charges, and the current rate. |
| HDFC Bank | Application through its website or mobile app; utilized-amount interest and flexible or no-EMI framing are advertised. | Starting range of 10.75%–12.50% per annum. Its eligibility page states ₹50,000 minimum, up to ₹20 lakh against equity mutual funds and up to ₹1 crore against debt mutual funds. | HDFC savings account and NetBanking access, single-name ownership, CAMS servicing, supported fund houses, current maximums and all charges. |
| SBI | Funds can be accessed through YONO or Internet Banking. | Interest rate is stated to be subject to bank policy; no single rate should be assumed from the route alone. | Live rate, eligible schemes, limit, fees, repayment rules and digital-application requirements. |
| Canara Bank | Canara Insta MF Loan, described as an end-to-end digital overdraft with online folio lien. | Equity/hybrid and debt categories have different limits; the published material does not establish one universal figure for every applicant. | Current rate, exact category limits, fees, fund-house and scheme coverage, and eligibility. |
| PhonePe | An announced in-app secured credit product for eligible users. | Company announcement of a credit limit up to ₹2 crore. | Whether the feature is currently available, the lending partner, your eligibility, collateral rules, KFS, total cost and approval amount. |
The figures in this table are lender- or platform-published terms, not market averages. A lower headline rate can be outweighed by a smaller limit, an annual renewal fee, processing charges or an ineligible portfolio.
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How to choose the right route for your situation
If you already bank with one of the providers
Start with the bank whose app or internet-banking profile already contains your KYC and investment relationship. Existing-customer status may be necessary for a digital offer, as with the select-customer wording on ICICI’s route and the account and NetBanking requirements stated by HDFC. This can reduce paperwork, but it does not guarantee approval or the highest limit.
If your holdings are mostly equity funds
Expect a more conservative borrowing percentage than for many debt funds because equity NAVs can move sharply. ICICI publishes a digital ceiling of up to 70% of NAV for equity funds. HDFC publishes a maximum of ₹20 lakh against equity mutual funds on its eligibility page. These are provider-specific limits; they do not establish what another lender will offer.
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If your holdings are mostly debt funds
Debt funds may receive a higher advance percentage under some policies. ICICI states up to 80% of NAV for debt funds on its digital route, subject to its ₹1 crore digital cap. HDFC states up to ₹1 crore against debt mutual funds on its eligibility page. The lender may still exclude particular schemes or apply a lower value after reviewing credit quality, maturity, concentration and liquidity.
If you need a large, short-term liquidity buffer
An overdraft can be more efficient than a full-disbursement term loan when you draw and repay repeatedly, because interest may accrue only on the utilized amount. Confirm this wording in your own sanction documents, along with whether a minimum utilization, renewal or commitment charge applies. A high advertised maximum, such as the ₹2 crore announced by PhonePe, is not evidence that your portfolio or income will qualify for that amount.
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Every lender has its own approved-scheme list and valuation rules. Use this checklist before spending time on a digital application:
- Applicant type: Federal Bank’s published conditions include a resident individual. Other applicant categories may require a different channel or may not be supported.
- Age and credit assessment: Federal Bank lists age conditions and says the facility remains subject to KYC, verification, documentation, credit assessment and bank approval. An on-screen indication is not a sanction.
- Ownership: Units generally need to be held in the applicant’s own name. HDFC’s eligibility information specifies single-name holdings.
- Servicing and account relationship: HDFC specifies an HDFC savings account, NetBanking access and CAMS-serviced holdings. Similar account or registrar restrictions can apply elsewhere.
- Fund and scheme eligibility: Approved fund houses, schemes, plans, folios and units can differ. A mutual fund appearing in your statement is not automatically pledgeable.
- Minimum amount: Federal Bank refers to a minimum eligible amount, while HDFC publishes a ₹50,000 minimum on its eligibility page. Confirm whether the threshold refers to the sanctioned limit, the drawdown or the collateral value.
- Documentation: Keep PAN, identity and address details, bank-account information, folio numbers and current statements available. The lender may fetch holdings electronically but can still request verification.
- Repayment capacity: A collateral-backed facility still requires a credible plan for interest and principal. Approval is not a substitute for affordability assessment.
How the digital application generally works
The labels differ by app, but Federal Bank’s stated journey illustrates the sequence. Follow the lender’s live screens rather than relying on an old tutorial.
- Check eligibility. Sign in to the official banking app or website and choose the mutual-fund loan or overdraft option. Treat any preliminary amount as indicative only.
- Fetch or declare the portfolio. Authorize the service to retrieve eligible folios, or provide the requested details. Compare the displayed schemes with your own statement.
- Select units. Choose the units to be pledged. Review the quantity, NAV date or valuation basis, and the resulting drawing power.
- Create the lien or pledge. Complete the electronic authorization. The selected units become security; you should receive a confirmation of the encumbered folios.
- Complete KYC and assessment. Upload or confirm documents and answer credit questions. The bank may verify identity, ownership, income and the fund data.
- Read the KFS and sanction communication. Check rate, benchmark or reset method, utilization basis, processing fee, renewal fee, taxes, overdue charges, prepayment rules, tenure, margin requirements and default remedies.
- Accept the facility documents. Do not treat a displayed limit as final until the formal approval and agreements are issued.
- Draw funds after activation. Transfer or use only the amount required. Keep a record of the outstanding balance and interest accrual.
Federal Bank specifically says that an indicative eligibility display before assessment is not a loan sanction or a commitment. The same principle is sensible for every platform: a pre-approved banner can change after verification.
How much can you borrow?
The basic calculation is the lender’s recognized value of your eligible units multiplied by its advance percentage, subject to product and customer caps. Recognized value may differ from the latest NAV because the lender can apply a haircut, exclude units or use a specified valuation date.
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Do not combine percentages from one provider with rupee limits from another. ICICI’s 70% equity, 80% debt and ₹1 crore digital cap belong to its stated digital product. HDFC’s ₹20 lakh equity and ₹1 crore debt maxima belong to its eligibility information. Canara Bank also distinguishes equity/hybrid from debt, but the exact current values must be checked in its terms.
Interest, fees and the real cost
Headline rates are starting points
Federal Bank lists 9.50%–12% per annum. ICICI lists 10.75%–11.75% per annum and says the actual rate depends on segment and asset category; its rate and fee information may be revised. HDFC lists a starting range of 10.75%–12.50% per annum. These ranges were listed by the providers in 2026 and are not directly comparable offers because the eligibility, collateral and rate-setting rules differ.
Charges can change the effective cost
ICICI’s information lists processing charges of up to 2% of the borrowed amount and an annual renewal charge, alongside other charge information. Confirm the current amount, taxes, minimum fee and applicability in the official schedule and your KFS. Other providers may use different processing, renewal, documentation, overdue or account-related charges.
Check the charging basis
Federal Bank says interest is charged only on the amount utilized and for the time it remains outstanding. HDFC’s materials also present utilized-amount interest and flexible or no-EMI positioning. Verify whether your facility is an overdraft, whether interest is debited monthly, and whether any undrawn-limit or renewal charge applies.
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| Item to record | Why it matters |
|---|---|
| Sanctioned and immediately usable amount | A high collateral value is unhelpful if the product cap or margin leaves little usable credit. |
| Annual interest rate and reset basis | A floating or policy-linked rate can change; a range is not your approved rate. |
| Interest calculation | Confirm utilization versus sanctioned limit, daily or monthly computation and debit date. |
| Processing and documentation charges | One-time fees raise the cost of a short borrowing period. |
| Renewal or annual charges | Important when the balance remains open beyond one year. |
| Overdue, default and margin charges | These can apply when payments or collateral requirements are missed. |
| Prepayment or closure conditions | Check for notice, minimum interest or other restrictions before repaying early. |
| Lien-release timing and fees | You need to know when the units become freely transferable after settlement. |
What happens to your mutual funds while pledged?
You remain invested, but the selected units are under a lien or pledge. Federal Bank states that after outstanding amounts, applicable interest and charges are repaid, it initiates lien release. Obtain written confirmation that the release has completed and check the folio or registrar record before assuming the units are unencumbered.
Because the units are security, you may not be able to redeem, switch or transfer them freely. Dividends or distributions, if any, can be treated according to the facility terms. A falling NAV can reduce collateral coverage even though your loan balance has not changed. Read the agreement’s margin-call and enforcement clauses before pledging volatile funds.
Common failure points and practical fixes
Your scheme does not appear
The fund may be outside the lender’s approved list, serviced by an unsupported registrar, held in joint names, or recorded with mismatched KYC. Check the lender’s current scheme coverage, confirm folio ownership and update KYC through the appropriate channel. Do not pledge a different fund merely to obtain a limit without considering its risk and exit costs.
The displayed limit is lower than expected
Possible causes include a lower lender valuation, a category haircut, an existing lien, a product cap or a market move. Ask for the recognized value and advance percentage rather than relying on the NAV shown in your investment app.
The app asks you to visit a branch
Digital availability may be restricted to selected customers or uncomplicated ownership patterns. A branch route can still be legitimate, but request the same KFS, fee schedule and lien documentation before signing.
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The rate changes after submission
Marketing ranges are not binding quotes. Compare the sanctioned rate and its reset clause with the earlier display, and proceed only if the total cost remains acceptable.
You need to close the facility
Request the exact payoff amount, including accrued interest and charges. After payment, obtain the lender’s lien-release confirmation and verify that the registrar or folio record shows the units as free of encumbrance.
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A decision checklist before you accept
- Does the lender accept every scheme and folio you plan to pledge?
- Is ownership in the required name, and is the servicing registrar supported?
- What is the lender’s recognized value and advance percentage for each fund category?
- What amount can you draw immediately, after product and customer caps?
- What exact annual rate, reset method and utilization basis appear in the KFS?
- Have you included processing, renewal, taxes, overdue and closure charges?
- Can you repay interest if the NAV falls and the lender reduces drawing power?
- What transactions are restricted while units are pledged?
- What event triggers a margin call, forced sale or other enforcement?
- How and when will the lien be released after full settlement?
- Is the application channel genuinely available to you today, rather than merely announced?
Bottom line: choose terms, not a headline ranking
For an existing customer with eligible holdings, a bank app that already supports the relevant folio can be the simplest route. Federal Bank publishes the lowest starting range among the named bank routes in this comparison, while ICICI publishes clear equity/debt percentages and HDFC publishes explicit rupee eligibility figures; those facts still do not make any one provider universally best. SBI and Canara require current disclosure checks, and PhonePe’s announced ₹2 crore ceiling requires especially careful verification of present availability and the actual lending partner.
Apply only after matching your funds and account relationship to the lender’s rules. Then compare the formal KFS and sanction communication on amount, rate basis, every charge, repayment flexibility, default treatment and lien release. Those terms—not an app badge or an advertised maximum—determine whether borrowing against your mutual funds is suitable.
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