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Kolkata: A personal loan is as unsecured loan which is sanctioned by a bank or NBFC without the borrower submitting any collateral. The two key factors to decide it are the income level and credit score of the applicant and/or borrower. They carry a declared rate of interest, usually floating. On the other hand, a loan against shares is a secured loan with the applicant pledging shares owned by him/her to secure the loan. All major banks offer both personal loans and loans against shares.
Usually the interest on personal loans is higher than that on loans against shares since the former is an unsecured loan, with the higher spread by the bank covering for the risk the lender is taking by disbursing an unsecured loan. Loans against shares are obtained by pledging shares (or mutual funds) as collaterals. Such loans sanctioned as a share of the market value of the stocks pledged. The shares are held by the bank as long as the loan is not fully repaid. Let us have a look at the interest rate offered by three of India's top banks for personal loans as well as that for loans against shares.
We have chosen State Bank, which is India's largest lender, HDFC Bank which is the largest private sector bank and ICICI Bank which is the second biggest lender. We give here both the interest rate and the processing fees for this type of loan.
State Bank of India: 10.05% to 15.05% per annum
Processing fees: Up to 1.50%
HDFC Bank: 9.99%-24.00% per annum
Processing fees: Rs 6,500 + GST
ICICI Bank: 10.45% to 16.50% per annum
Processing fees: Up to 2%
SBI: There are no strings attached vis-a-vis the end use of loans against shares (a feature similar to personal loans). SBI offers loans of up to Rs 20 lakh at affordable rates of interest in this category. The repayment tenure usually ranges up to 30 months. The rate of interest for these loans is about 10.50%. The rate of interest levied will depend on the loan amount, shares pledged as your security and repayment tenure. A processing fee of 0.75% of the loan amount + applicable GST subject to minimum of Rs 1000 is also applicable. Review charges of Rs 1000 + applicable Service Tax (only for overdraft accounts) are also applicable.
HDFC Bank: The interest rate for HDFC Bank for loan against shares is about 9.40% – 12.35% per annum. The borrower pays interest on the amount he/she actually uses and the interest is paid at the end of each month based on daily outstanding balance. This loan is similar to an overdraft. Also, processing fee of Rs 2,500-7,500 are also applicable.
ICICI Bank: The interest rate on loans against shares for ICICI Bank is 10.75% - 11.75% per annum. The interest is calculated on the utilized amount and period much like an overdraft. A non-refundable loan processing charge of up to 2% of sanctioned loan amount is applicable. There is also a non-refundable renewal charge of Rs 2500 per annum plus applicable GST on renewal at the end of each year. If the shares have to sold on request by a customer, Rs 5,000 plus applicable taxes and brokerages if any have to be paid.
