Jio Financial Services’ “Loans Against Shares” is An Important Business Move [Explained]

Introduction

Today something exciting is happening with Jio Financial Services, their stock shot up by 5.61%. News portals like Fortune India, Business Standard, Economic Times are reporting that this jump is tied to their latest announcement. What is the announcement? Jio Finance, their lending arm, is stepping into the world of digital loans against shares. The news portals are reporting as if Apple has launched a new iPone series mid-year. Hence, I thought, let’s explore and find out why this news is causing the share price to jump. Is this hyperactivity sustainable or its just a blip?

Jio Finance Latest News

First things first, what’s this “loan against shares” thing all about?

Well, it is exactly what it sounds like. Let’s assume that you’ve got some shares in your Demat account. Let’s say the shares are of Reliance Industries or TCS. Instead of selling them when you need cash, you pledge them to a lender like Jio Finance to get a loan. And while you as a shareholder have actually pledged your shares, you are still the owner of those shares. You will be the owner, you’ll earn dividends, and if the stock price rises, you benefit from that too.

Jio Finance is rolling out this all digital service.

They’re promising loans in just 10 minutes, up to Rs.1 crore, all through an online process.

You’ve probably dealt with the formalities of traditional loans, where paperwork, visits to the bank, and a few waiting days for approval is involved. But the Jio’s pitch here is speed and simplicity, and that’s where I think they have the edge over others. Let me explain it more clearly.

There are other Indian companies like Bajaj Finserv, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, and Aditya Birla Capital, etc where shares can be pledged as collateral for loans. However, Jio stands out with its fully digital process via the JioFinance app. It is promising loan disbursal up to Rs.1 crore in just 10 minutes. I think it is faster than competitors like Bajaj Finserv (disbursal within 24 hours). If I’m not wrong, I think traditional banks may even require at least a bank visit before loan disbursal.

In today’s times when convenience is a big parameter, who wouldn’t want a loan that’s as quick as ordering food on Zomato? I think, this is what will make Jio Finance stand out from others in this line of business.

Stock Market Liked It

There was a 5.61% jump in Jio Financial Services’ stock price. All major news articles are covering this announcement of Jio Finance. This can be one reason why the stock jumped 5%+. It is a positive development and a beaten down stock like Jio Finance can react like that.

When a company announces something new and promising, especially in a hot sector like financial services, investors do take notice.

The market saw Jio Finance stepping into a space that’s already popular but ripe for disruption. As I said earlier, loans against securities are not new. Banks and NBFCs have been offering them for years. But Jio’s digital-first approach, backed by the Reliance brand, feels different.

Investors are betting that this isn’t just a small side hustle for the Reliance Industries. New product launched are a sign they’re serious about growing their lending business (under the Jio Financial Services wing).

It is also when a company tied to Mukesh Ambani makes a bold move, people listen.

The Business Side

India’s financial services market is massive.

As of 31-March-2025, there are about 3.94 crore number accounts in NSDL alone. The value of securities parked in these accounts is about Rs.464 Lakh Crore (US $5,424 Billion) – You can check the NSDL’s website for updated details.

Out of these account, many of them could use some extra cash without selling their investments. Think about it, maybe there is a small business owner who needs funds to buy inventory. Even a salaried employee may wants funds to renovate the home. Selling the shares might mean losing out on future gains. It is especially true for Indian market whose long term trend is very bullish. So in such a scenario, borrowing may make sense to many.

This is where Jio Finance is stepping in with their loan against share service.

What’s clever here is how they’re targeting this service.

The eligibility criteria for the loan are: An Indian resident, aged 18-75, with a good credit profile and shares in NSDL. These three parameters cover a decent chunk of the population. Plus, the maximum loan-to-value (LTV) ratio of 50%, as per RBI guidelines, keeps things safe for both the lender and the borrower. If the market crashes and your shares lose value, Jio can ask you to pledge more or repay some amount to balance things out.

I think, Jio Finance is taking a calculated risk, and they’ve got systems in place to manage it.

There is also a Rs.1 crore cap for digital loans. It’s a sign that Jio isn’t just playing in the small leagues. They’re aiming for high-net-worth individuals and serious investors who hold big portfolios.

At the same time, the 10-minute approval process makes it accessible enough for the average middle-class Indian with a decent stock holding.

There’s another angle too, ‘more reliable revenue than traditional lending.’

Loans have always been a juicy business for Banks and NBFCs. There will always be a big group of people who will need loans for varied reasons. Companies like Jio Finance earns interest on these loans (that’s the business). But what’s risky in this line of business are NPAs. But loan against share is a secured lending business. The risk of a disbursed loan becoming a dead NPA is lower than unsecured loans like personal loans.

I think, if Jio Finance can play their cards right, this could become a steady income stream for them.

It looks like a smart balance.

Growth and Competition

Jio Financial Services is part of the Reliance Industries (RIL) ecosystem. RIL gives its group companies a massive edge. They’ve also got the tech know-how from Jio’s telecom whose huge customer base is also a big advantage. More than anything else, the RIL group has very deep pockets to scale this up to something bigger like Bajaj Finserv and others.

I think, for Reliance (Jio Finance), offering loans against shares isn’t just about adding a new product, it’s about building a stronger foothold in the lending market. Right now, banks like HDFC and NBFCs like Bajaj Finance dominate this space. But Jio’s digital efficiency could give them a good competition.

Say you are a stock holder who is comparing options. Bank A takes three days to process your loan and wants you to visit a branch. Jio Finance says, “Do it on your phone in 10 minutes.” Where do you think you will go? Exactly. Speed and convenience are huge selling points these days. it is especially true for younger Indians who live on their smartphones. Plus, with Jio’s (Reliance) brand name, people might hesitate less pledging their shared for loans.

What Happens if The Market Crash

You might ask, what happens if the stock market takes a nosedive?

If share values drop, borrowers might struggle to maintain the LTV ratio, and Jio might have to sell those pledged shares to recover the loan. That’s not great for anyone involved.

But here’s the thing, I think Jio is not blind to this phenomenon. If we are able to think this scenario, Banks and NBFCs might have plans for it in their books.

For example, Jio Finances’ website mentions keeping an eye on market conditions, and I’m guessing they’ve got risk management teams working overtime to handle such scenarios.

It’s a challenge, sure, and a potential threat. Let’s understand it using a hypothetical example.

Suppose I have a demat account with a Rs.1 crore parked value. I took a Rs.50 lakh loan (against my securities) and in next 3 months the market falls by more than 50%. What the Bank or NBFC will do in such a scenario? In this case the pledged shares’ value have gone down and it is now below against my Rs.50 lakh loan. The NBFC will first issue a margin call, asking me to pledge additional shares or repay part of the loan to restore the 50% Loan-to-Value (LTV) ratio as per RBI guidelines. If I fail to comply within the stipulated time (usually a few days), the Bank/NBFC can sell my pledged shares in the open market to recover the outstanding loan amount.

This process protects the NBFC’s financial stability, though it might mean I lose ownership of those shares at a low price during the crash (which is kind of unfair, as I was not responsible for the market crash). Anyways, it is also true that values of a share portfolio falling by 50% or more is also a very rare event. I’m saying this with responsibility and years of experience in the stock market.

Conclusion

So, is this loan-against-shares launch good news for Jio Financial Services? I think it is a good news for Jio Finance considering the kind of tech they have to implement this business successfully. The market also seems to agree to this view, hence the share price spiked by 5.61% today (on the date of announcement).

Do share your view in the comment section below.

Have a happy investing.