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Banks (Finance)

Secured Borrowing on the Rise: Loan Growth Slows, But Collateral-Based Loans Skyrocket

Strategic Insights

— 1 min read

As unsecured lending becomes riskier for banks, borrowers are seeking more stable options by pledging securities, gold, and deposits as collateral. This shift is reflected in the significant growth in loans against securities, gold, and deposits, which outpaced personal loan growth in the last fiscal year. The Loan-to-Value (LTV) ratio, interest rates, and market volatility have a significant impact on loan terms and conditions. As consumers consider secured borrowing, they must be aware of the risks and benefits associated with it.

Key Takeaways:

  • Loan against securities grew 18% on-year in FY25, outpacing personal loan growth which slowed down to 7.9%.
  • Gold loans witnessed a 103% growth in FY25, while personal loan growth slowed down to 7.9% year-on-year.
  • LTV ratio for securities and bonds depends on the type of security pledged, with a regulatory cap of 75% for demat form and 50% for physical form.
  • Interest rates on loan against securities range from 9.4-13%, while penal rates can go up to 300 basis points more.
  • Borrowers are advised to verify if lenders allow early release of securities if part of the loan is repaid for added flexibility.
  • Santosh Agarwal, CEO of Paisabazaar, suggests comparing LTV ratios offered by multiple lenders before making a decision.
  • Adhil Shetty, CEO of Bankbazaar.com, notes that loan against securities can be an economical and efficient borrowing option for individuals with substantial investment portfolios.

Statistics:

  • Loan against securities grew 18% on-year in FY25.
  • Gold loans witnessed a 103% growth in FY25.
  • Personal loan growth slowed down to 7.9% year-on-year in FY25.

Sources:

  • "As personal loan growth slows, secured borrowing via loans against securities, gold, and deposits rises." - IE Online Media Services Pvt. Ltd.
  • "Loan against securities grew 18% on-year in FY25, compared with 11.3% a year ago." - IE Online Media Services Pvt. Ltd.
  • "The growth in gold loans was 103% in FY25, compared with 14.8% in FY24." - IE Online Media Services Pvt. Ltd.

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