Loans against mutual funds (LAMF) are gaining traction among Indian banks as a secured lending product tailored to younger, digitally native investors. Under these offerings, customers pledge eligible mutual fund units as collateral to access loans or overdraft facilities without selling their investments—preserving their market exposure while unlocking liquidity.
Banks are marketing LAMF as digital-first, paperless solutions that streamline underwriting and improve turnaround times. The appeal is clear: secured lending backed by transparent, real-time collateral valuations reduces credit risk compared to unsecured retail products.
The trend signals a structural shift in how younger Indians save and invest. SIP adoption and market-linked products have grown substantially, replacing traditional fixed deposits as the preferred vehicle for retail wealth accumulation. Banks are responding by designing credit products around these new asset classes rather than competing for commodity deposit flows.
LAMF also serves a retention play: by offering credit against existing mutual fund holdings, banks deepen customer relationships and increase wallet share among high-intent retail investors. The paperless delivery model aligns with customer expectations for frictionless digital banking.
