Equity shares are issued by companies to pool in investments, which are then used for expansion. As an investor, you can purchase an equity share of any company listed on the stock exchange such as BSE and NSE to earn profits via dividends and capital gains. Investing in equity shares is a great way to start with investment in the stock market in India. One of the banks that allows you to buy equity shares and take loans against the same, is the State Bank of India (SBI). You can contact the bank for the purchase of these shares.
One of the advantages of holding an SBI equity share is that when the company goes through a loss, it will be directly proportional to your equity investment and not any higher. Every equity shareholder is a part-owner of a particular company, so you get the right to control the management decisions through voting power. SBI also offers loans on the shares, which you can avail to finance your personal needs, meet contingencies, and subscribe to the rights or new issue of shares.
The SBI loan amount is up to Rs. 20 lakhs. With loans against securities, you can arrange funds for unforeseen expenses, as well as keep your investments intact. Let us now understand the features of an SBI loan against shares.
Features of SBI Loan against Equity Shares
Below-given are the features of the loan against share by the State Bank of India.
- Eligibility: This facility is offered to existing individual customers who have had a satisfactory relationship with the State Bank of India, maintaining a DEMAT account with SBI Cap Sec. Non-resident Indians are not eligible for this loan.
- Type of Loan: This SBI loan is offered as an Overdraft or Demand Loan. It is available in a single name.
- Purpose of a Loan against Securities: You can take a secured loan against shares for personal needs or financial emergencies. Funds will not be granted for inter-corporate investments, speculative purposes, and acquiring or controlling interest in an organization/s.
- Loan Amount: The minimum and maximum borrowing amounts are Rs. 50,000 and Rs. 20 lakhs, respectively. However, SBI loans against equity shares must not be more than Rs. 10 lakhs if the purpose is subscribing to IPOs.
- SBI Loan Interest Rates: The State Bank of India Loan against Shares Interest Rates 2019 is 8.45% over 1-year MCLR. The spread over 1-year MCLR is 2.50%, thus making the effective rate of interest 10.95% with a reset period of 1 year.
- Repayment Schedule: The repayment period for demand SBI loan against equity shares is a maximum of 30 months. For an Overdraft loan, the tenure is the same, but subject to renewal every year.
- Margin: You have to provide 50% of the existing market price of the shares secured with the bank, as the margin amount.
- Security: The security is the DEMAT shares against which the SBI loan amount is sanctioned.
- Fees: Processing fees for SBI overdraft loan and demand loan is 0.75% of the loan amount along with the applicable GST (minimum Rs.1000 that is non-refundable).
- Review Charges: The charges are Rs 1000 with applicable Service Tax. This charge is only applicable to your Overdraft account.
So if you want to invest in State Bank of India equity share, then you can visit the nearest bank branch or its official website for more details, and even apply for a loan against it in time of a financial crisis.