Glossary
What is Pledge? Meaning, Example & Why It Matters
Using shares or other securities in your demat account as collateral to get margin for trading.
Pledging means marking securities in your demat account as collateral so your broker can give you margin against them. The shares stay in your demat account and you remain the owner, entitled to dividends and corporate actions, but they are locked until you unpledge them. The pledge is recorded with the depository and confirmed by you, often through an OTP.
Why Pledge matters to you
Pledging lets long-term investors use their holdings to trade derivatives or take leveraged positions without selling. The margin you receive is lower than the market value of the shares, after a haircut that reflects how risky the security is. Exchange rules also often require part of the margin for certain trades to be in cash.
There are costs and risks. Brokers may charge a fee for pledging and unpledging, plus GST. If your trading losses exceed your cash and margin, the broker can sell pledged shares to recover dues. Haircuts can also increase during volatile markets, reducing your available margin suddenly.
Practical tip: only pledge holdings you would be comfortable losing if trades go wrong. Check the haircut and fees beforehand, and remember that pledged shares cannot be sold until they are unpledged, which can take time.
Example: Illustrative only: if you pledge shares worth ₹2,00,000 with a 20% haircut, you might get around ₹1,60,000 as collateral margin, subject to your broker's rules and any cash margin requirement.
See it in rupees: every charge and tax on a real trade, at every broker. Open the brokerage calculator
Related terms
- GlossaryMargin
The money or collateral you must keep with your broker to take and hold leveraged positions.
- GlossaryMTF (Margin Trading Facility)
A broker-funded facility that lets you buy shares for delivery by paying only part of the cost upfront.
- GlossaryDemat Account
An electronic account that holds your shares, ETFs, bonds and other securities in dematerialised form.
- GlossaryPeak Margin
A rule requiring traders to hold sufficient margin at random intraday snapshots, not just at the end of the day.
Frequently asked questions
Do I still get dividends on pledged shares?
Yes, as the shares remain in your demat account, you continue to receive dividends and other corporate benefits.
Can I sell pledged shares?
You usually need to unpledge them first, though some brokers allow selling pledged shares directly with automatic unpledging.
Is there a fee for pledging?
Many brokers charge a small fee per pledge or unpledge request, plus GST. Check your broker's tariff.