Why can’t some holdings be pledged? (2024)

FAQs

Why can't some holdings be pledged? ›

Some holdings cannot be pledged for the following reasons: Stocks or Mutual funds that are not present in the approved list of securities cannot be pledged. The approved list of securities that can be pledged can be found by visiting zerodha.com/approved-securities.

As per RBI regulations, a loan-to-value (LTV) ratio of 50% is always maintained when lending based on the stock pledge. Since the proposed loan amount is Rs. 100 crore, the promoters will have to pledge stocks of at least Rs. 200 crore worth of shares with the bank; this translates to 40 lakh shares.

Fluctuations in the market value of pledged shares change the value of the collateral. Promoters must maintain the minimum collateral value agreed upon in the contract. If the value of the shares falls below the agreed amount, the borrower must provide additional shares or pay cash to make up for the shortfall.

What happens if you do not pledge on time? If you don't pledge on the same day before 9 pm or have a margin shortfall, it will trigger automatic squaring off your position on T+7 day. You can pledge the securities anytime to get the additional limit/margin. What can be pledged?

On the other hand, unpledged assets are assets that are not used as collateral for a loan or other financial obligation. These assets are owned outright by the borrower and are not encumbered in any way. The borrower has full control over these assets and can use them as they see fit.

Assets not specifically pledged means one which is not subject to any security held by a creditor or creditors. If you own a asset not being used as security for a loan like that -- that is an asset not specifically pledged --- which means it's available for the creditors.

Share pledging may be a good strategy if the cash flow is strong enough to keep up the collateral value. If the cash flow is poor and promoters cannot maintain collateral value, the chances of loss increase since the lenders can sell the pledged shares in the market.

It is a mandatory process introduced by SEBI. When you buy shares under MTF, you have to pledge those shares to continue holding the position. It needs to be done by 9:00 PM on the same day of purchasing stock. In case you fail to do so, your shares will be squared-off on T+7 days.

You can pledge the securities in the demat account to trade F&O. When you do so, the funds that you can withdraw from your account will be calculated after making the adjustments across the cash in your account and the collateral margin that is blocked for your F&O positions.

Can I sell shares if they are pledged? ›

Yes, you can sell your pledged holding.

Yes, the pledged holdings can be sold without placing an unpledge request by placing a sell order on Kite using CNC product type. To learn more, visit zerodha.com/z-connect/tradezerodha/kite/instantly-sell-pledged-stocks-on-kite. The collateral margin will be reduced to the extent of the shares sold.

SEBI requires brokers to collect margins from clients before executing orders to cover potential losses. If clients fail to maintain adequate margins, a margin shortfall occurs. The margin shortfall is the difference between the required margin by SEBI and the available margin in the form of funds or collateral.

The cost of pledging is ₹30 + GST per instrument, irrespective of the quantity pledged. There are no charges for unpledging.

A pledged asset is an asset that is used by a lender to secure a debt or loan and can include cash, stocks, bonds, and other equity or securities.

Yes. CDSL system permits pledging of lock-in securities. Pledged securities which are under lock- in can be invoked by the pledgee only after the lock in period is over.

Share unpledging is the act of removing the pledge made on the share. When you repay your dues and clear the outstanding loan against the pledged shares, the shares will be unpledged. Under the Margin Trading Facility, when you release the pledged shares, it would be referred to as share unpledging.

Once you have pledged shares to obtain trading margin, you have the option to unpledge them once the margin requirement is fulfilled. Upon unpledging, the shares will be promptly transferred back to your demat account. In addition, unpledging shares entails relinquishing the corresponding margin associated with them.