Calculate return on equity
Set your own cost of funds and capital target once, then the risk weight, credit cost, opex, and LSP fee for each book. The metrics below show what's actually left for the shareholder, per rupee of capital held — the number that should decide where it goes next.
LAMF/LAS
Capital required
20.00
ROE
2.5%
Personal Loan
Capital required
20.00
ROE
2.5%
At these inputs the two books land close on ROE (LAMF 2.5% vs PL 2.5%) — but LAMF gets there with near-zero credit risk and a book RBI is actively nudging lenders toward.
Who lends how much?
Banks can lend up to 75% of the value of your pledged mutual funds.NBFCs can lend only up to 50%.
The type of fund you pledge matters even moreIf you pledge equity mutual funds, the loan carries a 125% risk weight. That's the same as an unsecured personal loan, so lenders have to set aside more capital for it.Debt funds are left out of this rule.
Why RBI treats unsecured loans more strictly?
- In November 2023, the risk weight on personal loans went up overnight from 100% to 125%.
- The real-world numbers back this up: secured retail loans default at just 0.7%, while unsecured loans default at more than double that.
- Even so, over 70% of fintech loan books are still unsecured.
Why pledged mutual funds are safer for lenders?
- Their value is checked against the market price every day. If the value drops too far, the lender sees the margin breach early, before it turns into a loss.
- This is why RBI has been quietly pushing lenders toward secured lending for over two years.
Why the comparison isn't about the rate?
LAMF is priced close to the cost of funds because collateral does the risk work. Personal loans price well above it — yet regulatory capital treats both almost the same.
Gross NPA on secured retail loans
Risk weight on unsecured PL and on CME-classified LAMF
Share of fintech/LSP loan books that is unsecured
The regulatory backdrop
This isn't a one-off data point — it's the direction the regulator has been pushing the whole system for over two years.
Loans secured primarily by shares, convertible instruments, or units of equity-oriented (non-debt) mutual fund schemes are classified by RBI as Capital Market Exposure (CME) and carry a flat 125% risk weight under the Master Circular on Prudential Norms on Capital Adequacy — the same bracket as unsecured consumer credit. This is a market-price-volatility-driven rule, not a credit-default one, and it applies regardless of how conservatively the loan is margined.
— RBI Master Circular — Prudential Norms on Capital AdequacyNo. Loans against units of debt-oriented mutual fund schemes are explicitly excluded from CME, per the 2025 draft RBI (Commercial Banks — Capital Market Exposure) Directions, and are not subject to the 125% weight — meaning the capital-efficiency case for LAMF holds only when the book is built predominantly on debt-fund collateral, not equity funds or shares.
— Draft RBI (Commercial Banks — CME) Directions, 2025RBI raised the risk weight on unsecured consumer credit exposure, including personal loans, from 100% to 125% for banks in a circular dated November 16, 2023 — while explicitly excluding secured categories such as gold-backed loans from the increase.
— RBI circular, Nov 16, 2023RBI's December 2025 Financial Stability Report recorded gross NPAs of roughly 0.7% for secured retail loans against 1.7–1.8% for unsecured retail loans as of March 2026, and noted that over half of retail loan slippages now originate from the smaller, unsecured share of the book.
— RBI Financial Stability Report, Dec 2025Unsecured loans make up more than 70% of fintech/LSP loan books, over half of it to borrowers under 35, and RBI has flagged over-leverage across multiple lenders and weaker credit assessment in this exact sourcing channel as a supervisory concern.
— RBI Financial Stability Report; Business Standard, Dec 2025Because pledged mutual fund units are lien-marked with the RTA or depository and marked to market daily, a margin breach triggers a top-up call or partial lien invocation before real loss accrues. This keeps realised credit cost close to zero even where regulatory capital treatment (equity/share collateral) doesn't reward it — the argument for LAMF there rests on credit-cost and volatility, not on capital relief.
RBI is steering system capital toward secured retail credit and away from unsecured consumer credit, and has carved out a specific, lower-friction capital path for debt-fund-backed lending. A lender building out a LAMF/LAS book on debt-fund collateral is moving with that current on all three counts — capital treatment, NPA trajectory, and where policy is heading next. A book built on equity-fund or share collateral still benefits on NPA and volatility, but competes with PL on capital terms.