Derivatives

All you wanted to know about pledging rules

Akhil Nallamuthu BL Research Bureau | Updated on October 09, 2021

Are pledged shares in demat account safe? What is the process to pledge & unpledge? If pledge share can be sold, is pledging of new shares required? Will the margin money be automatically credited back if not used within 3 months?

Vijaykumar Shingade

Pledged shares are safe especially after the implementation of new rules in September last year. The securities that investors pledge will no longer be transferred to broker’s demat account. Rather, such pledged securities will be tagged separately as ‘pledged’ and will remain in the investor’s demat. So, brokers will have no control over pledged stocks. But owner of pledged stocks too cannot sell the stock before the same is released out of pledge.The pledging process should now be initiated from the investor’s end whereas earlier brokers were able to transfer investor securities to their demat against any margin shortfall, sometimes without prior intimation.

To pledge shares, visit your holdings page that can be found in the console provided by your broker, select the securities, and choose pledge option. Follow the verification procedure sent by CDSL/NSDL to your e-mail and you are done. To remove pledge, visit the same holding page and request an ‘unpledge’. SEBI mandates that funds left unused in demat for 3 months should be transferred back to investors’ bank account.

Send your queries to derivatives@thehindu.co.in

Published on October 09, 2021

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