Demat account: How to pledge shares? Here's a step-by-step guide
Investors have the option to leverage their securities held in their demat accounts by pledging them as collateral to obtain a loan. This process, known as pledging, allows borrowers to access funds based on the value of their securities, including shares, debentures, bonds, and mutual fund units. By offering securities as collateral, borrowers can typically secure higher loan amounts at favorable interest rates, as lenders perceive lower risk due to the underlying asset. Moreover, the process of obtaining such loans involves minimal documentation and shorter processing times compared to traditional loan applications.
Pledging of shares provides a mechanism for shareholders to leverage their shareholdings to access financing, while lenders use the pledged shares as security to mitigate credit risk. It's essential for shareholders to carefully evaluate the terms and conditions of the loan facility and understand the implications of pledging shares before entering into such arrangements. Additionally, shareholders should regularly monitor the status of pledged shares and ensure timely repayment of the loan to avoid potential consequences.
Pledging securities from your demat account involves a straightforward process, typically facilitated by your Depository Participant (DP) or broker.
Pledging securities involves two essential steps for successful execution. Firstly, the pledge request needs to be submitted on your trading account. Secondly, the pledge must be authorised on the CDSL portal before 7 PM. Failure to authorise the pledge by the specified time will result in the unavailability of margins for the securities. However, if the pledge is duly authorised, margins become available from the next trading day. To
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