Pledge is basically giving a lien on your shares to a bank or a financier to borrow against the market value of the shares. Normally, banks create pledge with a haircut of 50% and credit the loan to the account of the investor. The process for creating a pledge on demat securities is quite simple. Here is how it moves…
  • Pledgor and the pledgee must have a beneficial owner account in NSDL or CDSL. These accounts can be with the same DP or with different DPs. But NSDL to CDSL pledge and CDSL to NSDL pledge are not permitted currently.
  • Pledgor will instruct its DP to create a pledge request by submitting a "Pledge Form" with a tick on "Create Pledge".
  • Pledgor will inform the pledgee about the creation of pledge request by giving a copy of the pledge report obtained from its DP.
  • After that, the pledgee may instruct its DP to confirm the creation of pledge by submitting a "Pledge Form" with a tick on "Confirm creation of Pledge". The pledge gets created in favour of the pledgee only when the pledgee’s DP confirms the creation of the pledge in the system.
  • Normally, the DP does not get into the financial loan pat. That is between the pledgor and the pledgee. Disbursement of the loan to the pledgor is outside the depository system.