No-cost EMIs backed by mutual funds: a new fintech category is rewriting the rules of consumer lending

SMPL
Gurugram (Haryana) [India], September 22: A new kind of consumer credit is taking shape in India, secured not by a salary slip or a credit score but by the borrower’s own mutual fund units. The collateral pool behind it is large and growing quickly: Rs 87.08 lakh crore of assets held by 6.2 crore investors. 
The idea is not new. Banks and NBFCs have offered loans against securities for years, and digital lien marking through the registrars has cut what used to be a branch process down to minutes. A few fintechs and NBFCs have grown around the same proposition, at rates well below what a personal loan costs. Yet the product has stayed popular mainly with high net worth borrowers and has yet to find a retail audience.
Retail India borrows for consumption, and that credit is taken at the moment of purchase rather than before it. The loan gets chosen at the counter or on the checkout page, in the same session as the purchase. Almost all of it is unsecured, and it is priced that way. Converting a credit card purchase into instalments typically costs 14% to 24% a year plus a processing fee, and consumer durable loans from NBFCs are often priced higher still.
The result is that India’s mutual fund investors borrow on the same terms as someone holding no assets at all. They are, by now, a larger group than the country’s credit card base: TransUnion CIBIL’s Beyond the Swipe 2026 report counted 5.2 crore consumers holding a live credit card as of March 2026. So when a family needs money for a phone or a laptop, a holiday, a two-wheeler or a medical bill, the choice is an expensive EMI or redeeming an investment and breaking years of compounding for a short-term need.
1Fi, a fintech founded in 2025, is trying to close that gap with no-cost EMIs backed by the customer’s own mutual fund units. Because the credit is secured against a liquid, digitally pledgeable asset, the lender’s cost of capital is lower than on unsecured consumer credit, and so is the subvention a merchant pays to make an EMI no-cost. On those plans the customer pays no interest and no processing fee. Eligibility is set by the value of the portfolio rather than by a credit bureau score, which means an investor with no credit card and no credit history can still qualify.

“Indians have built enormous wealth in mutual funds, but that wealth sits locked away precisely when families need it most. Pledging it as collateral turns it into fair, affordable and transparent credit, without ever breaking the habit of investing,” said Pranav Aggarwal, co-founder and chief executive officer of 1Fi.
1Fi works as a payment option at partner merchants across electronics, healthcare, consumer durables, furniture, two-wheelers and travel. The customer selects 1Fi at checkout and clears an OTP-based eligibility check, with no card, no CIBIL check and no income documents required. A digital lien is marked on the units and the customer repays in flexible instalments. The units stay in the customer’s name and continue to compound over time. 
“Unlike a lengthy loan application, a 1Fi payment is completed with a few OTPs. Brands and payment companies can plug it into their existing lending and payment flows without rebuilding anything.” said Sourabh Girdhar, co-founder and CTO of 1Fi. 
The shift also reaches customers the card system has been slow to serve. TransUnion CIBIL found that half of India’s new-to-credit-card consumers as of March 2026 were aged 30 or below, and that 46% lived in semi-urban and rural markets. 1Fi’s own analysis puts more than 2.8 crore Gen Z investors in mutual funds against 1.6 crore holding credit cards, and 1.7 crore women investors against 0.6 crore. For a first-time earner or a self-employed borrower with a thin credit file, a portfolio is often the only asset a lender can price. 
AMFI expects the industry to reach 10 crore investors by 2030. On that trajectory, household mutual fund portfolios become one of the largest pools of usable collateral in the country, and a source of affordability and liquidity that consumer lending has barely begun to tap.
For more information, visit: https://1fi.in/ 
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