Pledging in share market is a process where traders use their existing stocks, ETFs, or mutual funds as collateral to obtain margin for trading. Instead of keeping your holdings idle, pledging helps unlock funds that can be used for futures, options selling, intraday trading, and covering MTM losses—without selling your portfolio.


This margin can then be used for:

  • Selling options (shorting options)

  • Taking futures positions

  • Intraday equity trading

  • Buying options (in most brokers)

  • Covering MTM losses

Instead of keeping your stocks idle in the Demat account, pledging allows you to unlock their value and use it for trading.

How Does Pledging Work?

 

When you pledge your shares, ETFs, or mutual funds, the broker grants collateral margin after applying a haircut.

What is a Haircut?

 

A haircut is a percentage deduction to protect brokers/exchanges from price fluctuations.

Example:

 

  • You pledge stocks worth ₹1,00,000

  • Haircut = 10%

  • Eligible collateral = ₹90,000

So, ₹90,000 will be added as margin to your trading account.

You retain ownership of your shares.
You receive dividends, bonuses, split benefits even during pledging.
Only restriction: You cannot sell the pledged securities unless you unpledge them.

Why Do Traders Use Pledging?

 

Many traders face limited cash margins but have a good portfolio.
Pledging helps them:

  • Use holdings to generate trading capital
  • Avoid selling long-term investments
  • Get higher leverage for F&O trades
  • Execute trading opportunities without adding fresh cash

This makes pledging extremely popular among derivative traders.

Where Can You Use Pledge Margin?

 

You can use collateral margin for:

 

  • Futures buying & selling

  • Options selling (shorting)

  • Equity intraday trades

  • Covering MTM losses

You cannot use collateral margin for:

 

  • Equity delivery buying

  • Paying brokerage, DP charges, and penalties

  • Settling losses in the cash segment

Cash Margin Requirement (Important for F&O Traders)

 

According to SEBI rules:

50% of the margin must be in cash

 

(Balance 50% can be collateral margin)

If your F&O position requires ₹1,00,000 margin:

  • Cash required → ₹50,000

  • Remaining → Up to ₹50,000 collateral

If you don’t maintain enough cash:

 

The broker will charge Delayed Payment Charges (DPC) on the cash shortfall.

This is why many experienced traders balance cash + collateral smartly.

If you have pledged LiquidBees ETFs or liquid mutual funds, the collateral margin you receive from these instruments appears under a dedicated section in your trading platform.

You can view this margin under: Collateral (Liquid Funds) section.

This section specifically shows:

  • The total collateral value received from pledging liquid securities

  • The haircut-adjusted margin

  • How much of this margin is usable for F&O

  • Any blocked amount due to ongoing positions

Since LiquidBees and liquid mutual funds are considered cash-equivalent collateral, they help meet the mandatory 50% cash/cash-equivalent margin requirement for F&O trades—making them highly preferred for pledging.

Pledging vs. Unpledging

 

ActionMeaningTime to complete
PledgingOffering securities as collateralSame day or T+1

Unpledging

Removing collateral to sell holdingsSame day / T+1

You must unpledge shares first before selling them.

Pledging & Unpledging Charges (Broker-wise)

Below are the latest charges by major Indian brokers:

1. Zerodha Pledging Charges

 

Pledge charge: ₹30 + GST per ISIN per request
Unpledge charge: ₹0

Detailed Zerodha charges:
https://comparestockbrokerages.in/zerodha-charges-and-features/

2. Groww Pledging Charges

 

Pledge charge: ₹0
Unpledge charge: ₹20 + GST per ISIN

Full details:
https://comparestockbrokerages.in/groww/

3. Angel One Pledging Charges

 

Pledge charge: ₹20 + GST per ISIN
Unpledge charge: ₹20 + GST per ISIN

Angel One page:
https://comparestockbrokerages.in/angelone/

4. Upstox Pledging Charges

 

Pledge charge: ₹20 + GST per ISIN
Unpledge charge: ₹20 + GST per ISIN

Upstox detailed page:
https://comparestockbrokerages.in/upstox/

5. Dhan Pledging Charges

 

Pledge charge: ₹15 + GST per ISIN
Unpledge charge: ₹15 + GST per ISIN

Visit the full Dhan details:
https://comparestockbrokerages.in/dhan/

Benefits of Pledging

 

  • Use idle holdings to generate margin
  • Avoid selling long-term investments
  • Good for option sellers
  • Receive dividends during pledging
  • A smart way to increase trading capacity

Risks of Pledging

 

  • Over-leveraging → higher losses
  • Market-to-market losses must be funded in cash
  • DPC penalties if the cash requirement is not met
  • Forced square-off if you can’t maintain the margin

Pledging gives power, but only if used responsibly.

Example: How Pledging Helps

 

You own ₹2,00,000 worth of stocks.
Haircut applied = 20%
Eligible collateral = ₹1,60,000

You want to sell Nifty options that require a ₹1,50,000 margin.

With pledging:
✔ You can execute the trade
✔ You only need ₹75,000 cash due to the 50:50 rule
✔ Remaining ₹75,000 comes from collateral

This gives you extra trading capability without extra money.

FAQs About Pledging in the Share Market

 

1. What is pledging in the share market?

Pledging is the process of using your existing stocks, ETFs, or mutual funds as collateral to get trading margin from your broker.

2. Do I still own my shares after pledging?

Yes. The shares remain in your Demat account. Only their status changes to “pledged.” You continue to receive dividends, bonuses, and split benefits.

3. What is a haircut in pledging?

A haircut is a percentage deduction applied to your pledged value to protect the broker from price fluctuations. After deducting the haircut, the remaining value is given as collateral margin.

4. Which brokers offer pledging?

All major brokers such as Zerodha, Groww, Upstox, Angel One, and Dhan offer pledging for shares, ETFs, and mutual funds.

5. Can I sell my pledged shares?

You must unpledge the shares first. Once unpledged, you can sell them normally.

6. How long does pledging and unpledging take?

Most brokers complete pledging and unpledging within the same day or T+1 day.

7. Can I use collateral margin for buying stocks?

No. Collateral margin cannot be used for equity delivery buying. It can be used for futures, option selling, and intraday trades.

8. Do I need to maintain a cash margin?

Yes. As per SEBI rules, at least 50% of the margin must be in cash or cash equivalents (like LiquidBees). The rest can be collateral.

9. Are there charges for pledging?

Yes. Brokers like Zerodha, Upstox, Angel One, and Dhan charge per ISIN for pledging. Groww offers free pledging but charges for unpledging.

10. Is pledging safe for traders?

Yes, pledging is safe if used wisely. The risk arises only if you over-leverage or fail to maintain required cash for MTM, leading to penalties or position square-off.

Important Links

 

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