The loan-to-value (LTV) ratio shows the proportion of your loan amount compared to the value of the securities you have pledged.
At Zerodha Capital, the maximum loan offered is up to 45% of the value of the pledged securities. For example, if the total value of the securities pledged is Rs. 5,00,000, the maximum loan that can be disbursed is Rs. 2,25,000.
The formula
LTV = loan amount / value of pledged securities
= 2,25,000 / 5,00,000 = 45%
After disbursal
Once the loan is disbursed, the LTV includes everything you owe, not just the principal:
LTV = (outstanding principal + outstanding interest + penalty charges) / market value of pledged securities
For example, if the market value of your pledged securities falls to Rs. 4,50,000, outstanding interest is Rs. 1,000 and penal charges are Rs. 50, then:
LTV = (2,25,000 + 1,000 + 50) / 4,50,000 = 50.02%
Borrowers are expected to keep the LTV within the permitted limit throughout the loan tenure.