The LAS Reform Blueprint: Expanding Credit, Managing Volatility

Introduction: A Quiet but Powerful Reform

Most lending discussions focus on MSMEs and personal loans. Yet a major shift is taking place in capital-market credit.

In October, the RBI announced major reforms to Loans Against Securities (LAS). Effective April 1, 2026, they redefine how banks lend against securities such as shares, bonds, and mutual funds.

By raising limits, expanding eligible collateral, and adding real-time monitoring, the RBI has made LAS a mainstream credit product. The reforms aim to expand liquidity and strengthen risk management together.

The Evolving Role of LAS in India’s Credit Ecosystem

A Loan Against Securities lets borrowers pledge market instruments to access funds without selling them. It provides flexible liquidity to individuals and businesses.

Previously, strict exposure limits and low loan-to-value (LTV) ratios kept the LAS segment small. The new rules reflect stronger markets and better data systems. They allow banks to lend efficiently while keeping exposure under control.

The timing is important. Credit demand in India is widening beyond traditional secured loans, while savings are flowing into financial assets. Mutual fund assets stood at ₹75.6 lakh crore as of September 2025 (AMFI). The new framework connects this market wealth to formal lending, ensuring capital moves productively but with guardrails.

The Reform Package: Key Highlights

The framework liberalizes access while tightening oversight, promoting sustainable growth with stronger discipline.

The Dual Impact: Liquidity Gains and Emerging Risks

The LAS reforms bring both opportunities and challenges. They open new credit channels but also add sensitivity to market movements.

A. Expanding Liquidity and Credit Flow

• Broader Collateral: Borrowers can now pledge a range of assets, including equity, debt, and fund units.

• Higher Limits: The rise from ₹20 lakh to ₹1 crore expands access for retail and high-net-worth investors.

• Business Flexibility: Companies can use securities to manage cashflow gaps instead of taking on high-cost loans.

• Market Liquidity: Allowing loans against multiple asset classes supports market depth and trading activity.

Together, these changes boost liquidity and help banks grow secured lending portfolios.

B. Systemic Risks and Market Challenges

• Market Volatility: Sharp falls in share or bond prices can trigger margin calls and collateral erosion.

• Liquidity Pressure: Rating downgrades can force substitution of pledged securities, raising short-term funding strain.

• Monitoring Gaps: Lenders using static valuation systems may react too late to price shifts impacting portfolio risk

• Concentration Risk: Large exposures to limited sectors or borrowers can magnify losses in downturns.

The RBI’s exposure caps - 20% of Tier 1 capital for direct exposure and 40% in aggregate - can help limit contagion. But control depends on execution. Lenders must track portfolios daily, maintain dynamic margins, and act fast on collateral changes. If not managed well, volatility could turn LAS into a source of stress.

Strategic Takeaways for Lending Executives

For senior leaders in lending institutions, LAS is not only a product change. It’s a shift in how credit, risk, and technology must align. The key is balancing growth with governance.

1. Rethink Product Mix

LAS can complement MSME, consumer, and supply-chain loans. Executives should review how securities-backed credit fits into their overall asset mix - balancing returns, cost of funds, and risk concentration.

2. Strengthen Risk Intelligence

LAS lending blends market and credit risk. Lenders need integrated dashboards that combine borrower data with live collateral values and rating feeds. Real-time visibility is essential for quick corrective action during market swings.

3. Optimize Capital Allocation

The new ceilings make exposure management a strategic task. CFOs and CROs should model LAS profitability against capital usage and volatility. The best-run banks will use capital rules as design parameters for innovation, not barriers to growth.

4. Reinforce Governance

Boards must have visibility into market-linked exposures. A cross-functional oversight group that connects treasury, credit, and risk will ensure fast yet accountable decisions.

5. Prioritize Digital Transformation

Automation and data connectivity are now core enablers. APIs and AI tools can manage valuation feeds, monitor breaches, and forecast risks. Banks that embed such systems early will gain both compliance confidence and operational speed.

In short, LAS success depends on governed growth - scaling lending intelligently through digital and risk-aware frameworks.

The OneFin Advantage: Turning Regulation into Readiness

OneFin’s modular lending platform helps institutions align quickly with the new LAS framework. It can be the complete partner to help drive the transformation needed.

• Configurable Products: Define custom LTVs, margins, and borrower limits.

• Real-Time Collateral Engine: Integrate live prices, NAVs, and ratings for accurate valuation.

• Smart Alerts: Automate margin and downgrade notifications.

• Intelligent Risk Layer: Determine exposure, forecast trends and simulate market stress.

• Proven Scale: Over 16 lakh loans and 100 million API calls processed annually.

With its API-first, low-code design, OneFin lets lenders build compliant LAS products fast - combining agility and governance in one platform.

Conclusion: The Next Chapter of Collateral Lending

The Capital Market Exposure Directions, 2025 reshape how credit and markets connect. By widening access while enforcing stronger controls, the RBI has built a model that supports both liquidity and stability.

For lenders, modernization is essential. Investing in digital monitoring, data-driven decisioning, and governance will define leadership in this new phase.

With its configurable, AI-enabled platform, OneFin helps institutions move from compliance to confidence - lending faster, managing risk better, and scaling securely.

To know more about OneFin, schedule a Demo.