InvestorQ : What happens to a borrower’s dividends and bonuses after he/she pledges his/her shares in a loan against securities (LAS)?
Indrajeet Kashyap made post

What happens to a borrower’s dividends and bonuses after he/she pledges his/her shares in a loan against securities (LAS)?

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Pratik vyas answered.
3 years ago
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Loan against securities/shares (LAS) is a solution to an urgent finance requirement. In loan against securities (LAS), a lender gives you a loan against securities held by you. Thus, this is a secured loan as the lender has the collateral of your shares/securities, if you do not pay back or default on your loan.

Thus, by taking a loan against securities (LAS), you only pledge your stocks or securities, which owning them as well. LAS is the ideal way to get liquidity or liquid cash, without liquidating (or selling) them.

Opting for LAS makes sense when you are expecting a certain sum of money after a few months but require some money in the interim

In case of bonus or dividends announced by the company (whose stocks you own), the dividend or the bonus will accrue to you, and not to the lender.

It is important to highlight that a you have merely pledged your shares. That does not mean you have forgone your right to receive dividends and bonus shares. Thus, bonus shares will automatically be pledged.

A few points to note:

- You will get loan only against select securities. The list will be available on the bank or NBFCs website. Hence, don’t just look at your portfolio’s worth and think you will get a loan commensurate with your portfolio’s value.

- The bank/NBFC may offer different margin against different kind of securities. For instance, you may get up to 50% against Reliance shares and only 25% against a relatively, lesser-known midcap company.

- If you have demat account with the same bank (DP), you may be able to apply for the loan online , too. However, you still have to go through formal documentation.

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