Kamath said this makes it difficult to compete on interest rates. He added that when making loans, the best borrowers usually go to institutions that offer the lowest rates. Without an interest rate benefit, Zerodha would likely attract borrowers who have been rejected elsewhere, often with a weaker credit profile.
He also pointed out that unsecured loans involve recovery agents, frequent collection calls and constant follow-ups on repayments. Kamath said this is an incentive structure that Zerodha does not want to be a part of and it does not align with the brand the company has built.
Kamath said loans against securities are structurally different and safer. He noted that RBI rules require a 50% haircut on the value of the securities pledged, which means borrowers must hold assets worth at least twice the loan amount. According to him, this gives borrowers the comfort that they can afford the loan and reduces the overall risk.
Due to the lower risk, Zerodha is able to offer loans against securities at interest rates of around 10-11%, according to Kamath. He added that this approach also aligns with the company’s broader philosophy that credit should only be used when truly necessary and within an individual’s capabilities, rather than being pushed simply because it is easily accessible.
Kamath said the real advantage of Zerodha is that its customers already have effects with Zerodha. Lending against securities, he said, is a natural extension of the brokerage business and not an aggressive, standalone lending strategy.
He also noted that in many markets globally, such loans are treated as a brokerage function and do not even require a separate NBFC license.
#Zerodha #credit #cards #personal #loans #Nithin #Kamath