Digital Loans can be avail by HDFC Customers based on Mutual Funds

HDFC LAMF
HDFC Bank launched its Digital Loans against Mutual Funds (LAMF), in partnership with transfer agent CAMS. HDFC Customers can now avail mutual fund assets online and get overdraft limit set in their account in under three minutes.
This is the first time a bank (HDFC) has partnered with CAMS agent for transfer and mage the entire process online.

This is the good option for HDFC customer to avail benefits 

 Mutual fund's digital loans can be availed in three steps via HDFC Net banking

Step 1: Log in to myCAMS via HDFC Bank's Net banking portal and select which mutual funds you want to pledge from your portfolio

Step 2: Click on loan terms and conditions

Step 3: Input one-time password (OTP) and the overdraft will be ready to use in your account.

Arvind Kapil, Group Head - Unsecured Loans, Home, and Mortgage Loans, HDFC Bank says, "In emergencies, customers will not be forced to liquidate assets at less than optimal market conditions. They can instead design their own loan to tide over the cash crunch. With this product, we hope to reach out to customers in the tier 2 and 3 markets and bring them into the digital lending fold."

Note: The process of availing loan against MF units involves pledging of units, opening of a current account and withdrawals out of it in the form of loan.

How it works


 To avail digital loans against MF with the bank, the HDFC customer needs to open a current account with his/her name. You need to sign an agreement paper and complete the account opening formalities. After entering into a loan agreement with the lender, it then asks the MF registrar, like CAMS or Karvy to create a lien against the units. If the units are in demat form, the process is much faster.

The loan amount is sanctioned at a certain interest rate and tenure and you need to pay only when you use the money and for the number of days the money is used. Only interest is to be paid on a monthly basis, while the principal has to be paid back at the end of the tenure.

How much loan can you take?

 The quantum of loan or the overdraft will depend on the nature and market value of the MF units. While some lenders offer loans up to 70 percent of the net asset value (NAV), the others may restrict up to Rs 50 percent of NAV. In case of debt funds, it can be around 20 percent of NAV. The maximum loan amount can also be capped at say Rs 20 lakh to up to Rs 7.5 crore.
It's the units that are pledged but as an investor you enjoy all the benefits of being an investor like dividend or bonus, while your mutual fund units are pledged.

Interest rate

Get the rate confirmed from the bank, while currently, it is around 11 percent with most banks. In case the loan is from an NBFC, get to know the rate before you proceed.

Charges

 There is a processing fee that you need to pay in availing such an OD facility. It can vary across lenders and can be 0.75 percent of the loan amount with a certain cap at say Rs 50,000. Some lenders also ask for an annual renewal charge of say Rs 1,000. As an introductory offer, in the HDFC-CAMS loan scheme, the bank will be charging a processing fee of Rs 1,499 per customer.

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