Pledge / Hypothecation

Investors may get their securities held in a depository account pledged/hypothecated to avail of loan/credit facility.

Pledge of securities  requires that both the borrower (pledgor) and the lender (pledgee) shall have Demat Accounts.

Types of Pledge / Hypothecation Transactions

1. Pledge / Hypothecation Creation

   1. The account holder / pledgor needs to submit an instruction to initiate a pledge/hypothecation request indicating the option 'create a pledge/hypothecation' in the pledge/hypothecation form.
   2. The pledgor is required to indicate therein, the agreement number, closure date of the pledge/hypothecation, pledgee's details, and the details of securities to be pledged.
   3. The account holder need to have sufficient free balance of securities in his account prior to creation of the pledge / hypothecation.
   4. On receipt of the Pledge creation form, Abhipra as DP will enter the details of the request in the system and generate a pledge/hypothecation instruction number for the request. The request number hence generated is communicated to the account holder / pledgor.
   5. The securities pledged are moved from 'Free balances' to 'Pledged balances' account. Thus the securities pledged will not be available to pledgor for any other purpose.
   6. The details of the pledge / hypothecation are electronically communicated to pledgee's DP for confirmation.
   7. The pledgee's DP upon receipt of the pledge / hypothecation request, informs the pledgee.
   8. The pledgee needs to submit an instruction to its DP to accept/reject the pledge/hypothecation request by indicating the option 'confirm the creation of pledge/hypothecation' in the pledge / hypothecation form.
   9. The acceptance / rejection of pledge / hypothecation confirmation is electronically communicated to the pledgor's DP.
   10. Acceptance of the creation of pledge / hypothecation will appear in the system as "Pledged".
   11. The request for pledge cannot be cancelled once the request is accepted.
   12. In case the Pledgee rejects the pledge / hypothecation request, the reason for the rejection is reflected in the system and holding is moved back in to the free balance / lock-in account.

2. Pledge / Hypothecation Closure

   1. After the account holder / pledgor repays the loan to the pledgee, the pledgor needs to submit an instruction to initiate the closure of pledge / hypothecation by indicating the option 'close the pledge/hypothecation' in the pledge/hypothecation form.
   2. The pledgor is required to indicate the pledge / hypothecation instruction no at the time of closure request submission.
   3. Abhipra as DP based on the inputs received verify the details and enter the closure request details in the system and release the request.
   4. The details of the pledge / hypothecation closure request are electronically communicated to the pledgee's DP for confirmation.
   5. The pledgee based on the request received, accepts / reject the request. Upon acceptance shares are released and are moved from 'Pledged balances' to 'Free balances' account.
   6. The account holder / pledgor now may use the free balance holding and transact as per his will.

3. Pledge / Hypothecation Invocation

   1. The pledgee can invoke the pledged / hypothecated holding based upon the terms of the underlying agreement with the pledgor and the Bye Laws & Business Rules of NSDL and SEBI Regulations.
   2. The pledgee needs to submit an instruction to its DP to initiate a pledge / hypothecation invocation by indicating the option 'invoke the pledge/hypothecation' in the pledge/hypothecation form.
   3. The request for the invocation is entered in to the system by the Pledgee's DP and immediately electronically communicated to pledgor's DP.
   4. In the case of invocation of a pledge, the securities are transferred from the pledged balances of the pledgor to the pledgee's beneficial owner account. The intimation of the same travels to the pledgor's DP and the status of the pledge is changed to "closed, invoked".