InvestorQ : I have pledged securities to my bank. What happens to dividends and bonus issues?
Jignesh Gupta made post

I have pledged securities to my bank. What happens to dividends and bonus issues?

Answer
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vidhya Laxmi answered.
2 years ago


The securities pledged are only blocked in the account of pledgor (investor) in favour of the pledgee (lender). The shares are not debited to account. The pledgor would continue to receive all the corporate benefits. To answer your question if you are worried about what happens to your dividends, the answer is nothing will happen. You will continue to receive the dividends and the bonus shares and stop split shares as usual. That is because the lender has only pledged on the value of the shares and not on the value of the corporate benefits to the investor. There is one more interesting point for you to consider here.
What happens when you get bonus shares? Let me explain? Say you are holding 500 shares of Tata Steel and the company announces 1:1 bonus. Now you will have 1000 shares of the stock and the price would have roughly halved. What will the lender have a lien? The pledging operates on a proportionate lien system. This is how it works. If out of 500 shares you have pledged 400 shares of Tata Steel, then if the bonus is 1:1 your 800 shares will be pledged with your lender. So the pledging continues to be value-neutral for both the lender and the borrower. To answer and come back to your most basic question, nothing happens to your dividends and bonuses and they will continue as before.