Technical Glossary: Loan Against Securities Terms
Operating under a strict consultative mandate. We Don’t Sell, We Solve, the Terkar Capital LAS division believes that absolute technical clarity is essential for proper debt architecture. This glossary serves as a reliable institutional dictionary defining critical loan against securities terms. By standardizing these definitions, we help corporate treasuries, directors, and high-net-worth individual (HNWI) investors navigate asset-backed financing with confidence.
Technical Definitions A to Z
Category A / B / C Securities : A classification matrix used by institutional risk desks to group listed equities based on their market capitalization, daily trading volumes, and volatility indices. Category A blue-chip stocks qualify for maximum LTV allowances and low interest spreads, while Category C items face tighter restrictions or lower leverage caps.
Haircut : The risk percentage subtracted from the current market value of a security to account for potential price volatility. For example, if a financial institution applies a 55% haircut to a large-cap equity portfolio, it leaves an approved Loan-to-Value (LTV) limit of 45%.
Lien Marking (Electronic Pledge) : The secure process where a depository (NSDL or CDSL) locks a borrower's electronic securities in favor of a lender. This ensures the underlying assets cannot be sold or transferred while the debt line is active, though the borrower retains full right to all dividends and coupon payouts.
Lump Sum Principal Settlement : A structured repayment method where the borrower pays simple interest on drawn funds during the facility's lifecycle, then settles the entire original principal balance in one single payment at maturity. Our high-value transactions (₹50 Cr - ₹100 Cr) routinely use this framework across a 1-to-3-year tenure.
Margin Call Trigger : The exact mathematical threshold where a drop in secondary market asset prices causes an active loan balance to breach the agreed LTV limits. The borrower is required to restore balance within a set window by infusing immediate cash or pledging additional approved scripts.
Non-Dilutive Capital : Funding raised without giving up equity shares or ownership stakes in a company. A Loan Against Securities serves as a prime non-dilutive tool, letting promoters access deep liquidity lines up to ₹100 Crore without losing voting rights or future upside.
Repo-Linked Interest Rate : A dynamic pricing model where the loan's interest rate is directly tied to the Reserve Bank of India’s repo baseline. This ensures complete transparency for corporate borrowers, with large-ticket overdraft lines typically scaling between 10% and 12% p.a..