Zerodha, the third largest brokerage in the country will soon be a non-banking financial institution (NBFC) after receiving the license from the Reserve Bank of India (RBI).

In terms of trading volume, Zerodha is already the biggest in the country and in terms of active clients, it's just behind ICICI, said Nithin Kamat, founder and chief executive officer to CNBC-TV18.

Talking about the rationale for expanding into lending part of the business, Kamat said, "Right now, we are a high beta stock and we want to bring down the volatility that is associated directly with underlying stock markets and lending is a natural progression.”

On competition, Kamat said, "Every traditional broker we compete like ICICI to Sharekhan, all offer lending against securities and margin funding."