5 things to know about loan against demat shares

1. If you need a loan against your shares, it will be easier if you have a demat account with your bank.

2. The bank will grant a loan by marking a lien on the shares it holds in the demat account.

3. The margin can be as high as 50 per cent depending on the underlying security. The margins for shares is high as their value is very volatile.

4. The dividend will continue to be credited to your bank account even if the shares are held in lien. The lien will be lifted when you repay the loan.

5. The bank that is also a depository participant may offer pre-sanctioned loans on shares held in the demat account since it is easier for the bank to execute such loans.



(Courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre and Arti Bhargava)