https://v2.webnotes.in/tags/pledge-of-mf-units/Recent content in Pledge-of-Mf-Units on WebNotesHugoen-INTue, 19 May 2026 00:00:00 +0000https://v2.webnotes.in/pledge-of-mf-units/Tue, 19 May 2026 00:00:00 +0000https://v2.webnotes.in/pledge-of-mf-units/<p><strong>Pledging mutual fund units</strong> allows investors to use them as collateral for loans without redeeming the units. The mechanism enables short-term liquidity access while preserving long-term investment positions. Pledging typically requires units to be held in demat form (per <a href="https://v2.webnotes.in/dematerialisation-rematerialisation/">dematerialisation</a> ) rather than folio-based form.</p> <h2 id="framework">Framework</h2> <h3 id="pledge-mechanics">Pledge mechanics</h3> <ol> <li>Investor identifies units to pledge in demat account.</li> <li>Lender (bank, NBFC, broker) places a pledge marker.</li> <li>Pledged units cannot be redeemed without lender release.</li> <li>Loan disbursed against pledged units.</li> </ol> <h3 id="loan-to-value-ltv">Loan-to-value (LTV)</h3> <table> <thead> <tr> <th>Underlying asset</th> <th>Typical LTV</th> </tr> </thead> <tbody> <tr> <td>Liquid funds</td> <td>90-95%</td> </tr> <tr> <td>Equity MFs</td> <td>50-65%</td> </tr> <tr> <td>Debt MFs</td> <td>75-85%</td> </tr> <tr> <td>Hybrid MFs</td> <td>60-75%</td> </tr> </tbody> </table> <p>LTVs are conservative; lender protects against NAV decline.</p>