Stocks Pledging (Collateral) policy & process

Published on: June 14, 2023

If you are looking to pledge your securities for collateral margin, here is everything you need to know about it.

What is Pledging?

Pledging is the act of using your securities holdings as collateral to gain margin, allowing you to retain the ownership of your securities while temporarily transferring the rights to the lender. Your pledged securities act as a guarantee for the lender and during the pledge period, the lender places a hold on the pledged assets to avoid their transfer or sale.

When you pledge your holdings, the margin you gain against them, after the haircut deduction is referred to as collateral margin.

Which securities can you pledge?

With Definedge Securities, you can choose from a variety of securities to gain collateral margin, including –

Shares
Mutual Funds
ETFs
Government Securities Bonds (GSec Bonds)

To know which stocks you can pledge, check our approved list of stocks. The list also mentions the applicable haircut for each security.

How to pledge securities?

You can easily pledge your holdings from your MyAccount by following the below given steps.

Step 1 – On your MyAccount, select ‘Reports’ from the left-side menu and click on ‘Holding’ from the opened side menu.

Step 2 – On the Holding page, you will see three tabs – Holding Statement, Create Pledge & Unpledge.
Under the Holding Statement tab, you will be able to see all the securities you hold in your demat account.

Step 3 – Click on the ‘Create Pledge’ tab and you will see the list of your holdings that are eligible for pledging.
Select the scrips you wish to pledge, enter the quantity and click on ‘Create Pledge’. On the pop-up, click on ‘CONTINUE TO CDSL WEBSITE’ and finish the verification on the CDSL website.

Step 4 – Once your Pledge request is successful, respective collateral margin will be added to your account in T+1 days.

Please note – As per the exchange guidelines, to pledge stocks, 50% of the margin for F&O positions must be in cash or cash equivalent collateral. You can check the list of cash and non-cash component along with Definedge Haircut here

How to unpledge securities?

You can easily unpledge your holdings from your MyAccount by following the below given steps.

Step 1 – On your MyAccount, select ‘Reports’ from the left-side menu and click on ‘Holding’ from the opened side menu.

Step 3 – click on the ‘Unpledge’ tab. There you will see the list of your pledged stocks. Select the stocks you wish to unpledge, enter the quantity and click on the ‘UnPledge’ button below

Once your unpledging request is created, based based on our RMS policy margin will be released.

How to sell pledged stocks?

POA registered: You can directly sell the pledged stocks without unpledging, if POA is registered with us.
POA not registered: To sell pledged stocks when POA is not registered, you will have to first unpledge the stocks.

How to request POA?

Step 1 – To request for POA from your demat account, login to MyAccount and go to ‘Requests’ from the left side column.

Step 2 – On the Requests page, click on the downward arrow under the ‘Request Type’ section and select ‘Request for POA’.

Step 3 – Write a brief description for your request and click on ‘SUBMIT’ to send the POA request.

Step 4 – After submitting the request for POA, our team will share an offline form with you on your registered communication address, which needs to be filled in and sent back to us.

Step 5 – If all the formalities are done correctly, it takes around 24 working hours after we receive the form to fulfil your request.
Once done, you will be able to sell your pledged stocks on your trading terminal.

Where can I use collateral margin?

You can use your collateral margin in taking trades in Future positions and Options selling.

Charges

The following charges are applicable for pledging or unpledging securities with Definedge Securities.

Services	Charges
Margin Pledge/Closure/Invocation	₹ 18
SLB Charges	₹ 36 + CDSL/NSDL Charges
Margin Repledged/Release of Margin Repledged	₹ 2 + CDSL Charges
DEMAT – Per Certificate	₹ 18 + courier charges
REMAT – Per Certificate OR Per 100 Units/shares (Whichever is higher)	₹ 18
Conversion of MF units/ Destatementisation Per SOA	₹ 18 + courier charges
Reconversion of MF units to SOA or Redemption/Restatementisation Per SOA	₹ 18
Courier charges per request shall be charged separately	₹ 100
Rejection/Failure Entry-DRF/Instruction slip per entry	₹ 54
Pledge creation/Invocation	₹ 36
Pledge closure/ Unpledging	₹ 36

Please Note –

Interest will not be charged on the margin received through pledging until your ledger balance is positive. However, if your ledger account has insufficient funds/ negative balance, an interest of 0.05% per day will be charged.

FAQs

How much cash collateral is required for margin funding?

Ans – You need to maintain a minimum of 50% of the total available margin in the form of cash/cash equivalents. Further, you will get limits on stocks only up to the extent of credit in ledger as per exchange guidelines.
Note: As per the exchange guidelines, to pledge stocks, 50% of the margin for F&O positions must be in cash or cash equivalent collateral. You can check the list of cash and non-cash component along with Definedge Haircut here
If I have 50% cash margin and 50% collateral margin, will any positional trade attract interest on margin used?

Ans – Interest is not charged on the margin received through pledging until Ledger balance is positive. However, interest @ 0.05% per day will be charged on the debit balance/insufficient funds in the ledger account.
What is the process for pledging and unpledging?

Ans – Log in to My Account (https://myaccount.definedgesecurities.com/) with Definedge Securities UCC and follow the below path:
Reports -> Holdings -> Create Pledge/Unpledge.
Do you accept GS series bonds (government bonds) as collateral?

Ans – Yes, we do accept government bonds for collateral margin as per the Approved list of Securities for Collateral.
What is the time allowed for pledging?

Ans – You can place pledge requests till 7.00 PM. However, the limit will be received within T+1 days. Requests received after 7.00 PM will be processed the next day.
Can I sell pledged securities without unpledging?

Ans – To directly sell pledged shares, POA is required. However, the margin will be received within T+1 days. Alternatively, in cases where POA is not registered, you will have to unpledge the stocks/securities.

Can I trade in currency and commodity segments with the collateral margin?

Ans – Yes, you can trade in currency and commodity segments (for Options selling and Future positions) with the collateral margin

Brijesh Bhatia