National Securities Depository Limited
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Pledge / Hypothecation

Securities held in a depository account can be pledged/hypothecated to avail of loan/credit facility. Pledge of securities in NSDL depository requires that both the borrower (pledgor) and the lender (pledgee) should have account in NSDL depository.

The pledge/hypothecation transactions go through the following procedures:

  • Pledge/hypothecation creation
  • Pledge/hypothecation closure
  • Pledge/hypothecation invocation
  • The pledgor will submit an instruction to its DP to initiate a pledge/hypothecation request in the DPM (software provided by NSDL to the DP) indicating the option 'create a pledge/hypothecation' in the pledge/hypothecation form. The pledgor will indicate therein, the agreement number, closure date of the pledge/hypothecation (this date is indicative of the duration of pledge/hypothecation), pledgee's details, and the details of securities to be pledged.
  • The DP will check for the completeness of the form. The DP has to ensure that symbols like '-', '{' , '}', '[', ']', and ':' should not be the first character of the agreement number and that the securities requested to be pledged exist in the pledgor's account. If not so, the DP will return the same to the pledgor for rectification.
  • If the form is complete in all respects, the DP will accept the form for processing and issue an acknowledgment for the same to the pledgor.
  • The DP will enter the details of the request in the DPM, generate a pledge/hypothecation instruction number for the request and release the request to NSDL.
  • 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.
  • The DP shall write the pledge/hypothecation instruction number on the pledge/hypothecation form and intimate the same to the pledgor.
  • The details of the pledge/hypothecation are electronically communicated to the DPM of pledgee's DP through the DM for confirmation.
  • The pledge/hypothecation request will be displayed on the DPM of pledgee's DP.
  • The pledgee's DP will furnish the details of the pledge/hypothecation requests received for confirmation to the pledgee through the report generated by the DPM.
  • The pledgee will 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.
  • If the form is complete in all respects, the DP will accept the form for processing and issue an acknowledgment for the same to the pledgee.
  • The DP will compare the details on the form with that of the details as shown by the DPM against the pledge/hypothecation instruction number.
  • The DP will execute the order for accepting/rejecting the pledge/hypothecation request in the DPM as per the instructions given in the form.
  • In case of rejection by the pledgee, the DP will enter the rejection reason in the DPM as specified in the form.
  • The acceptance/rejection of pledge/hypothecation confirmation is electronically communicated to the DPM of the pledgor's DP through DM.
  • Acceptance of the creation of pledge/hypothecation will appear in the DPM of the pledgor's DP and pledgee's DP as a status change. Status of the pledge/hypothecation instruction will change to "Pledged".
  • In case of rejection by the pledgee, the bookings performed at the time of initiation of creation of the pledge/hypothecation instruction will be reversed and the securities will be debited from the pledged balances of the pledgor and credited to its free/locked-in balances. The reasons for rejection are displayed in the DPM of the pledgor's DP.
  • The pledgor's DP cannot cancel the pledge/hypothecation order after confirmation of creation of the pledge/hypothecation by the pledgee.
  • The pledgee's DP cannot confirm the creation of pledge/hypothecation after the closure date.
  • After the pledgor repays the loan to the pledgee, the pledgor will submit an instruction to its DP to initiate the closure of pledge/hypothecation by indicating the option 'close the pledge/hypothecation' in the pledge/hypothecation form.
  • If the form is complete in all respects, the DP will accept the form for processing and issue an acknowledgment for the same to the pledgor.
  • The DP will compare the details on the form with that of the details as shown by the DPM against the pledge/hypothecation instruction number.
  • The DP will enter the closure request details in the DPM against the pledge/hypothecation instruction number as per the instructions given in the form and verify/release the instruction to NSDL.
  • The details of the pledge/hypothecation closure request are electronically communicated to the DPM of pledgee's DP through the DM for confirmation.
  • The pledge/hypothecation closure request will be displayed on the DPM of the pledgee's DP.
  • The pledgee's DP will furnish the details of the pledge/hypothecation closure requests received for confirmation to the pledgee through a report generated by the DPM.`
  • The pledgee will submit an instruction to its DP to accept/reject the pledge/hypothecation closure request by indicating the option 'confirm the closure of pledge/hypothecation' in the pledge/hypothecation form.
  • If the form is complete in all respects, the DP will accept the form for processing and issue an acknowledgment for the same to the pledgee.
  • The DP will compare the details on the form with that of the details as shown by the DPM against the pledge/hypothecation instruction number.
  • The DP will execute the order for accepting/rejecting the pledge/hypothecation closure request in the DPM as per the instructions given in the form.
  • In case of rejection by the pledgee, the DP will enter the rejection reason in the DPM as specified in the form.
  • The acceptance/rejection of pledge/hypothecation closure confirmation is electronically communicated to the DPM of the pledgor's DP through DM.
  • Acceptance of the closure of pledge/hypothecation will appear in the DPM of the pledgor's DP and the pledgee's DP as a status change. Status of the pledge/hypothecation instruction will change to "Partially Closed" or "Closed, Settled" and the securities accepted for closure will be debited from the pledged balances of the pledgor and credited to its free/locked-in balances.
  • In case of rejection by the pledgee, the securities will continue to remain as pledged balances in the pledgor's account. The reasons for rejection are displayed in the DPM of the pledgor's DP.
  • In case of default by the pledgor in repaying the loan to the pledgee, after taking such steps as may be necessary as per the terms of the underlying agreement with the pledgor and the Bye Laws & Business Rules of NSDL and SEBI Regulations, the pledgee will 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.
  • If the form is complete in all respects, the DP will accept the form for processing and issue an acknowledgment for the same to the pledgee.
  • The DP will compare the details on the form with that of the details as shown by the DPM against the pledge/hypothecation instruction number.
  • The DP will enter the invocation request details in the DPM against the pledge/hypothecation instruction number as per the instructions given in the form and verify/release the instruction to NSDL.
  • The details of the hypothecation invocation request are electronically communicated to the DPM of pledgor's DP through the DM for confirmation.
  • 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 through DM and the status of the pledge is changed to "closed, invoked".
  • Locked-in securities cannot be invoked before the lock-in release date.
  • The hypothecation invocation request will be displayed on the DPM of the pledgor's DP.
  • The pledgor's DP will furnish the details of the hypothecation invocation requests received for confirmation to the pledgor through a report generated by the DPM.
  • The pledgor will instruct its DP to accept/reject the hypothecation invocation request by indicating the option 'confirm the invocation of hypothecation' in the pledge/hypothecation form.
  • The DP will check for the completeness of the form. If the form is incomplete, the DP will return the same to the pledgor for rectification.
  • In case the form is complete in all respects, the DP will accept the form for processing and issue an acknowledgment for the same to the pledgor.
  • The DP will compare the details on the form with that of the details as shown by the DPM against the hypothecation instruction number.
  • The DP will execute the order for accepting/rejecting the hypothecation invocation request in the DPM as per the instructions given in the form.
  • In case of rejection by the pledgor, the DP will enter the rejection reason in the DPM as specified in the form.
  • The acceptance/rejection of hypothecation invocation confirmation is electronically communicated to the DPM of the pledgee's DP through DM.
  • Acceptance of invocation of hypothecation will appear in the DPM of the pledgee's DP and the pledgor's DP as a status change. Status of the hypothecation instruction will change to "Closed, Invoked" and the securities are transferred from the pledged balances of the pledgor to the pledgee's beneficial owner account.
  • In case of rejection by the pledgor, the securities will continue to remain as pledged balances in the pledgor's account. The reasons for rejection will be displayed in the DPM of the pledgee's DP.