India’s largest stockbroking firm, Zerodha, is often praised for its low-cost, customer-first approach. However, many users wonder why the company does not offer popular lending products such as personal loans or credit cards, especially when several fintech platforms and NBFCs are aggressively expanding in this space. Zerodha’s co-founder and CEO Nithin Kamath has now clearly explained the reasoning behind this decision, shedding light on the company’s lending philosophy, cost structure, risk management, and brand values.
A Conscious Decision to Avoid Unsecured Lending
According to Nithin Kamath, Zerodha has intentionally kept its lending services limited and has chosen not to enter unsecured credit products like personal loans and credit cards. This is not due to a lack of opportunity, but rather a well-thought-out strategy aligned with the firm’s long-term vision.
Kamath explained that unsecured lending carries significantly higher risks and operational challenges, which do not fit well with Zerodha’s core business model or customer-centric philosophy.
The Funding Cost Disadvantage
One of the key reasons Zerodha avoids unsecured loans is its higher cost of funds. Kamath revealed that Zerodha’s funding cost is around 8.5 percent. In comparison, traditional banks can raise funds at approximately 3.5 percent, while large NBFCs manage funding at around 7 percent.
This difference puts Zerodha at a disadvantage in the unsecured lending market. Since personal loans and credit cards are highly competitive segments, customers with strong credit profiles usually prefer lenders offering the lowest interest rates. Zerodha, with its higher funding cost, would struggle to match these rates sustainably.
Risk of Attracting High-Risk Borrowers
Kamath also highlighted a critical risk factor: adverse customer selection. In unsecured lending, borrowers with good credit scores typically gravitate toward banks and large NBFCs offering cheaper loans. As a result, Zerodha could end up attracting customers who have already been rejected elsewhere.
This increases the likelihood of defaults and credit losses, making unsecured lending a risky and potentially unstable business for a firm that prioritizes financial discipline.
Challenges of the Unsecured Loan Model
Another major concern is the recovery-driven nature of unsecured lending. Kamath pointed out that personal loans and credit cards often rely heavily on recovery agents, repeated follow-ups, and aggressive collection practices.
Zerodha has consciously chosen to stay away from this approach. Such practices, Kamath said, do not align with the company’s brand identity, which focuses on transparency, simplicity, and respect for customers. Engaging in aggressive recovery methods could damage long-term trust and customer relationships.
Why Loans Against Securities Are Safer
Instead of unsecured products, Zerodha focuses on Loans Against Securities (LAS), which Kamath described as a much safer and more logical extension of the broking business.
Under RBI regulations, loans against securities require a mandatory 50 percent haircut. This means customers must pledge securities worth at least double the loan amount. This structure significantly reduces default risk and clearly indicates the borrower’s ability to service the loan.
Due to this built-in safety mechanism, Zerodha is able to offer loans against securities at interest rates of around 10–11 percent, while maintaining strong risk control.
Credit Should Be Need-Based, Not Easy Credit
Kamath emphasized that Zerodha believes credit should be used only when genuinely required and when the borrower has the capacity to repay. The company does not support the idea of pushing loans simply because they are easy to access.
This belief shapes Zerodha’s conservative lending approach and explains why it has never pursued aggressive credit expansion, despite the profitability potential in high-interest products.
Leveraging Existing Customer Holdings
One of Zerodha’s biggest strengths, according to Kamath, is that its customers already hold financial securities on the platform. Offering loans against these holdings is a natural extension of the broking ecosystem rather than a shift toward a full-fledged NBFC-style lending business.
In fact, in several global markets, loans against securities are considered a standard part of the broking function and often do not even require a separate NBFC license.
The Bigger Picture
Zerodha’s decision to avoid personal loans and credit cards reflects a long-term, sustainable mindset rather than short-term profit chasing. By focusing on secured lending, cost efficiency, and ethical credit use, the company aims to protect both its customers and its brand reputation.
For users expecting Zerodha to follow the typical fintech lending path, Kamath’s explanation makes one thing clear: the company prefers stability, responsibility, and trust over rapid expansion into high-risk products.
