Online distributors of direct mutual funds have started diversifying their offerings to increase their revenue.
Kuvera, an online investment platform of direct mutual funds has started offering loan against mutual fund units to investors.
So far, only banks and NBFCs offer loan against stocks and mutual funds. The platform has tied up with Bajaj Finance to offer loan to mutual fund investors. The facility lets an investor get a loan of up to 80% of the current market value of mutual fund units. Kuvera has extended this facility to all mutual fund investors, both direct and regular.
Kuvera will charge a processing fee of Rs.999 for loan below Rs.2 lakh and Rs.1,999 for loan above Rs.2 lakh. The NBFC will charge interest rate of 11.5% on the loan amount less than Rs.2 lakh and 10.5% if the loan amount exceeds Rs.2 lakh.
Explaining the rationale of the loan product, Gaurav Rastogi, CEO of Kuvera said, “It is a safe, quick and seamless option to tide over a short-term emergency, working capital exigency or to meet an unexpected expense, with the least impact on your financial goals. Recent uncertainties fueled by Covid-19 have highlighted the importance of cheaper pools of liquidity while staying consistent on investments.”
Other platforms like Zerodha and ETMoney will soon start offering loan against stocks and mutual funds.
Faisal Rahman, Product Head for COIN, the direct MF platform launched by Zerodha said, “We are looking to offer loan against stocks but it will be limited to our investors. In fact, Zerodha has got a NBFC license a year ago.”
Mukesh Kalra, CEO, ETMONEY said that his company too is exploring the introduction of loan against mutual funds on the platform. He, however, believes that the demand for loan against mutual funds is not high in the loan market.
Mohit Gang, Co - founder & CEO, Moneyfront says that loan against mutual funds makes sense for investors who are in urgent need of capital for short term like two to three months.
