Zerodha co-founder Nithin Kamath has delivered a blunt verdict on India's unsecured lending boom: it's a trap for lenders, toxic for brands, and not worth the chase.
In a LinkedIn post, Kamath dismantled the idea of Zerodha offering personal loans or credit cards, calling the economics "unworkable" and the borrower pool too risky. "We can't compete on rates," he said, pointing to Zerodha's 8.5% cost of funds versus 3.5% for banks. "Without a rate advantage, we'd only attract borrowers rejected elsewhere."
Kamath didn't mince words on the operational hazards either. "Unsecured lending means recovery agents, constant collection calls... exactly the kind of incentive cycle we don't want to participate in." The approach, he warned, runs counter to the credibility Zerodha has spent years building.
Instead, the brokerage is doubling down on Loan Against Securities (LAS)-a low-risk, asset-backed model aligned with its investor base. With a mandatory 50% haircut on pledged securities as per RBI rules, Kamath said LAS is "structurally safer" and allows rates of 10-11%.
"Credit should be used only when genuinely needed and within your means, not just because it's easily available," he said.
That stance puts him at odds with his brother and co-founder Nikhil Kamath, who recently argued for wider credit access-especially for consumer durables-to spur industrial growth. "We don't need to stick to yesterday so closely that our tomorrow is biased," Nikhil said during an AMA.
Nithin, however, sees danger in optimism. "Lending is not really in our DNA," he said, adding that India's socioeconomics make unsecured credit a minefield. "It's a poor country... beyond the top 3%, you have to charge higher rates. And when you do, defaults rise."
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