The surge in loans against mutual funds

India’s equity market today resembles a roller coaster that frequently stalls at the bottom. Sharp sell-offs and weeks-long losing streaks seem to have become the norm, with the benchmark Nifty 50 and the BSE Sensex down about 15% this year. But that hasn’t deterred investors from pledging their mutual funds to secure loans. In fact, the segment is witnessing double-digit growth.

It’s not a problem by itself. Loans against mutual funds are a handy way for investors to instantly access money without redeeming their investments. But a falling market changes the story. Borrowers could be forced to liquidate their investments …