The loan amount is usually calculated by multiplying the current value of your eligible mutual fund units by the lender's applicable loan-to-value ratio. Different schemes may receive different LTVs, and ineligible or locked units are excluded.
The final sanctioned limit may also be subject to the lender's minimum and maximum limits, credit checks and internal policy. Because NAV changes, the available limit can move over time.
Start with eligible portfolio value
A lender does not necessarily lend against every rupee in your mutual fund statement.
It first identifies schemes on its approved list, checks whether the units are free from another lien or lock-in, and uses the latest available NAV or repurchase value.
Only that eligible value enters the calculation.
Apply the lender's LTV
The basic formula is:
Eligible mutual fund value × applicable LTV = indicative credit limit
If eligible funds are worth ₹8 lakh and the applicable LTV is 60%, the indicative limit is ₹4.8 lakh.
A mixed portfolio is calculated scheme by scheme, so equity and debt holdings may contribute differently.
Why the final figure may be lower
Product caps, borrower eligibility, concentration limits, existing obligations and the lender's risk policy can reduce the amount.
The RBI guidance on advances against mutual fund units also links lending to the units' NAV or repurchase value and requires the lender to consider the purpose of the credit.
Sanction is not cash in your account
The calculated amount becomes a credit limit after approval and pledge confirmation.
You normally choose how much to draw.
If ₹4.8 lakh is sanctioned but you withdraw ₹1 lakh, only ₹1 lakh is disbursed and generally only that utilised amount attracts interest.
| Calculation step | Illustrative amount |
|---|---|
| Eligible equity funds | ₹5,00,000 |
| Eligible debt funds | ₹3,00,000 |
| Illustrative equity contribution at 50% | ₹2,50,000 |
| Illustrative debt contribution at 75% | ₹2,25,000 |
| Indicative combined limit | ₹4,75,000 |
A practical check before you decide
Write down four numbers before accepting the limit:
- Eligible portfolio value
- Scheme-wise LTV
- Sanctioned limit
- Amount you actually plan to use
Then test what happens if the portfolio falls by 10%.
This simple exercise separates borrowing capacity from borrowing need and shows whether you are leaving enough collateral headroom.
The Bottom Line
Think of the loan amount as a percentage of eligible, current portfolio value — not as the full value of all your investments.
The scheme-wise LTV, lender caps and borrower eligibility determine the sanctioned limit.
Check the lender's final sanction letter and Key Fact Statement before deciding how much to use.
Facing a financial emergency?
Check how much credit your mutual funds may support
Get an indicative eligibility check. The final limit and terms are decided by the lending partner.
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Information on this page is general in nature. Eligibility, approved schemes, LTV, rates and charges depend on the regulated lender's current policy and the final loan documents. This is not financial advice. The content is purely for educational purposes.