PhonePe enables loans against mutual fund investments

PhonePe has introduced a facility that allows users to take loans against their mutual fund investments directly through its app. The service is offered in partnership with DSP Finance, a tech-focused non-banking financial company (NBFC). Users can access up to ₹2 crore in under 10 minutes without redeeming their investments.

The Loans Against Mutual Funds (LAMF) product lets investors pledge their mutual fund holdings as collateral. Borrowers are required to pay interest only on the amount withdrawn, and there are no monthly principal repayments or EMIs.

The principal can be repaid at any time, after which the credit line can be reused. The service aims to provide liquidity while keeping mutual fund investments active.

The entire loan process, including onboarding, disbursement, repayment, and closure, is handled within the PhonePe app.

Steps to avail the loan:

• Access: Open the ‘Loan Against Mutual Fund’ option in the ‘Loans’ section on the PhonePe app.
• Loan offer: Enter PAN and OTP. Eligible mutual funds are fetched, and a loan offer is generated. Users select the loan amount.
• KYC and autopay: Complete KYC and set up AutoPay for interest payments.
• Pledge funds: Pledge mutual fund units to confirm the loan.
• Disbursement: Sign the loan agreement digitally. The loan amount is credited to the bank account.

Hemant Gala, CEO of PhonePe Lending, said the product provides access to secured credit while keeping investments intact.

Jayesh Mehta, CEO of DSP Finance, added that the facility allows users to manage short-term funding needs alongside their investment growth.

PhonePe, headquartered in India, has over 64 crore registered users and a digital payments network covering 4.5 crore merchants. Its services include digital payments, financial product distribution, and technology-based consumer services.