HDFC Bank launches digital loans against mutual funds. Here's all you need to know
HDFC Bank, one of the biggest private banks in the country, on Wednesday, launched its digital loans against mutual funds (LAMF), in partnership with mutual fund transfer agent CAMS.
The new offering will allow customers to pledge mutual fund assets online and get overdraft (or loan) limit set in their account in under three minutes.
With this product, customers can leverage their mutual fund (MF) portfolio to avail funds for any contingencies or emergencies without liquidating their investments or stopping their regular investment plans/SIPs.
Just in March, the bank had launched its digital loan against securities (LAS) model to avail loans in less than three minutes against shares. The interest for these loans was pegged at 10.5 percent. Then, the bank had stated that this offering would expand to other securites including mutual funds, bonds and insurance policies.
Customers have to log in to myCAMS via HDFC Bank website and select which mutual funds they would like to pledge from their portfolio. On clicking on loan terms and conditions and inputting one-time password (OTP), the overdraft will be ready to use in their account.
It is open to all HDFC Bank customers holding assets in at least one of the ten mutual fund houses registered with the CAMS. These ten fund houses together constitute about 60 percent of the total assets under management of the industry.
With digital LAMF, customers can design their own loan against mutual fund, choosing which assets from their portfolio they would like to pledge, calculate their overdraft limit eligibility against mutual fund, open a current account online instantly and get the money into the account, all in a matter of minutes.
The product is also aimed at first-time borrowers without credit history who can now access loans.
In a statement, Arvind Kapil, Group Head – Unsecured Loans, Home, and Mortgage Loans, HDFC Bank, said,
Digital LAMF is an industry-first innovation and takes customer convenience, flexibility and access to greater heights. In emergencies, customers will not be forced to liquidate assets at less than optimal market conditions. They can instead design their own loan to tide over the cash crunch. With this product, we hope to reach out to customers in the Tier II and III markets and bring them into the digital lending fold.
At present, HDFC Bank claims to have 43 million customers, 4,787 branches and 12,635 ATMs across 2,691 Indian towns and cities.
Challenging HDFC soon is Zerodha, which is planning to launch a similar product by the end of June. The Bengaluru-based stock brokerage firm plans to launch its loan against shares and mutual funds, and is looking to give loans with an average ticket size of Rs 1 lakh to 2 lakh, and an average interest rate of 12-13 percent.