Loan Against Mutual Funds

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Try out the API set here

Purpose and functionality

The KFintech LAMF API by Finsire is designed to facilitate seamless lending operations for RBI-regulated entities by allowing the pledge, revoke, and invoke of mutual funds held by users. This API ensures a secure and efficient process for lenders and borrowers, enhancing the lending experience through streamlined interactions with mutual fund holdings.

Details of KFintech LAMF API

KFintech LAMF API is designed for lenders and their users to fetch the information of their mutual funds portfolio, this data is 100% authentic and can be renewed time to time as its directly from the RTA. On top of this, user can pledge these mutual funds and Finsire's Mutual Fund LTV would be helpful to determine Approved Credit against their assets. Also. it facilitates lenders for actions like revoke and invoke.

Brokers supporting LAMF

Holdings in particular brokers can be used to pledge using KFintech LAMF API, as they would be in SOA or physical format.

Brokers supporting LAMF

Mutual funds bought through these brokers cannot be pledged through KFintech APIs as they are in dematerialized format and hence can be pledged through NSDL/CDSL route.

To take a Loan Against Mutual Fund (LAMF)


User side actions

Input Email, Mobile Number, and OTP to Fetch Mutual Funds

Step 1: Users start by entering their PAN and mobile number into the application.
Step 2: An OTP (One-Time Password) is sent to the provided mobile number.
Step 3: Users must enter the OTP to authenticate their identity. This ensures that only authorized individuals can access the mutual fund details.

Result: Once the OTP is validated, the system fetches and displays the user’s mutual fund holdings.

Confirm Pledge with OTP

Step 1: Users select the mutual fund assets they wish to pledge as collateral for the loan.
Step 2: A second OTP is generated and sent to the user for confirmation of the pledge.
Step 3: Users enter this OTP to finalize the pledge. This additional step ensures that the user consents to the lien marking of their mutual funds.

Result: Upon successful OTP validation, the mutual funds are lien-marked under the lender’s name, officially marking them as collateral.

Completion of Loan Setup

Step 1: After the mutual funds are pledged, the lender performs a penny drop to verify the user’s bank account. This involves transferring a small amount of money to the user’s account to ensure accuracy and linkage.
Step 2: The lender then completes other mandatory setups for EMI (Equated Monthly Instalment) payments, such as setting up automatic debits from the user’s account.

Result: With these steps completed, the loan process is finalized, and the user’s pledged mutual funds are securely managed as collateral.

Lender View of LAMF Dashboard

Lender side actions

Invoke and Revoke Pledges

Invocation:

Conditions: Lenders can invoke the pledge under certain conditions, such as:

  • Margin Call: If the value of the mutual funds falls below a certain threshold, triggering a need for additional collateral or repayment.
  • Invocation Limit Breach: If the user breaches agreed-upon limits related to the loan.
  • Payments Not Done (90 DPD): If the user fails to make payments for 90 days past due (DPD), the lender can invoke the pledged assets to recover the outstanding amount.

Process: The lender initiates the invocation process through the API, ensuring that the pledged assets are liquidated or otherwise utilized to cover the loan.

Revocation:

Conditions: Lenders can revoke the pledge under certain conditions, such as:

  • Loan Repayment: Once the loan is fully repaid, the lender can revoke the lien on the mutual funds.
  • Disbursement Issues: If there are problems in the disbursement of the loan amount, such as incorrect amounts or failed transactions.
  • Prepayment: If the user chooses to prepay the loan, the lender can revoke the pledge once the prepayment is processed.

Process: The lender initiates the revocation process through the API, releasing the lien on the mutual funds and allowing the user full access to their assets.

AMCs linked with KFintech


Value Addition of LAMF API for both parties

The LAMF API system by Finsire is essential for modern lending operations involving mutual funds due to the following reasons:

  1. Enhanced Efficiency: The integration of automated processes and streamlined workflows reduces processing time and operational costs, making the lending process more efficient.
  2. Improved Security: The system’s robust security measures protect against fraud and unauthorised access, ensuring the safety of user data and pledged assets.
  3. Transparent Operations: By providing clear and detailed views for both users and lenders, the system fosters transparency and trust in the lending process.
  4. Scalability: The system is designed to handle large volumes of transactions, making it scalable for financial institutions of all sizes.
  5. Regulatory Compliance: The maker-checker system and secure data handling ensure compliance with regulatory requirements, reducing the risk of legal issues.

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Requires license from Reserve Bank of India (RBI). Check out for more info

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You can try out the API here