PhonePe rolls out loan facility against mutual funds

Fintech platform PhonePe on Tuesday introduced a loan facility that allows users to borrow against their mutual fund holdings, providing them with access to funds without having to redeem their portfolios, marking its latest step into secured lending.

The new service, launched in partnership with non-banking finance company (NBFC) DSP Finance, enables loans of up to Rs 2 crore through the PhonePe app. The process, according to the company, is fully digital and can be completed in under 10 minutes.

By pledging mutual fund units as collateral, investors can access liquidity without having to sell their holdings. Unlike traditional loans, the facility functions more like a revolving credit line. Borrowers are required to pay interest only on the amount withdrawn, with no fixed instalments on the principal. Repayments can be made at any time within the sanctioned limit, and funds can be re-borrowed as needed. 

All stages of loan processing—from eligibility checks and KYC verification to disbursement and repayment—are managed within the PhonePe app. The company said this structure allows investors to maintain their systematic investment plans and continue earning market-linked returns, while also gaining access to short-term liquidity.

DSP Finance, part of the DSP Group, brings lending expertise to the tie-up, while PhonePe provides the distribution platform through its large user base.

Loans against mutual funds are not new to the Indian market. Banks and NBFCs have offered similar products for years, typically requiring branch visits and more paperwork. However, fintech players are now seeking to simplify the process with faster, app-based access.

PhonePe’s move places it alongside other platforms such as Paytm Money and Groww, which have also expanded beyond investment distribution into lending services. For fintechs, the strategy provides a way to deepen engagement with users and diversify revenue streams in a competitive payments market.

Since its launch as a payments app in 2016, PhonePe has built one of the largest digital footprints in India with over 640 million registered users, while steadily expanding into financial products such as insurance, investment distribution, and consumer credit.