Share market basics
Using shares or funds in your demat account as collateral to get trading margin from your broker, without selling them.
Pledging means offering securities you hold in your demat account, such as shares, ETFs or mutual fund units, as collateral to your broker in return for trading margin. The broker applies a haircut, a percentage cut based on the security's risk, and gives you the rest as collateral margin usable mainly for F&O positions. Suppose you pledge SBI shares worth ₹5,00,000 with a 20% haircut; you receive about ₹4,00,000 of margin. The shares stay in your name and you keep dividends. Rules require at least half of the margin for F&O to be in cash or cash equivalents, with the rest allowed from pledged stock. Charges apply per pledge request. The risk is obvious: if the F&O position loses, the broker can sell your pledged shares to recover the shortfall. Pledging turns a long-term investment into leverage, and should not be done casually.
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