Solution

The eligibility criteria to procure a loan against shares - loan against security shares are:   - One has to be within the age group of 18-65 years in order to avail of a loan against shares.   - The tenure of these loans is generally a year but can be extended and taken up for renewal if required.   - A minimum amount of INR 1 lakh and a maximum amount of INR 10 Lakhs can be availed for physical shares and INR 20 Lakhs for demat shares.   - An identity proof and a residence proof , income proof such as a salary slip , recent bank statements of 6 months, pan card ,cancelled cheque and a holding statement from the depository participant.   - The interest rates on these loans are in the range of 12-18% per annum and are cheaper than a personal loan.   - Shares held in the names of HUF, minors, Companies and NRI’s cannot be pledged. Only individuals are eligible.   - The Directors or Promoters of a Company cannot pledge shares of their respective Companies.   - The borrower needs to pledge his shares by filling a pledge request form with the details of the shares and these need to be submitted to the bank.   - A loan processing fee of 1-2% is charged against the loan amount sanctioned. There are no pre-payment charges for these kinds of loans.   - One can pledge a single select script against a higher margin and a maximum of 20 scripts can generally be pledged at a time. Certain banks specify no upper limits.   - If the value of the shares falls or the credit limit falls short additional shares need to be pledged or cash must be paid.   - One can also pledge the shares of a spouse, parents, brother, in laws and children above 18 years of age.   - Physical shares are acceptable only as marketable lots.