This article will examine how to pledge shares in HDFC Securities. Firstly, we will define what pledging shares in HDFC Securities is, and then discuss its pros and cons.
Pledging of shares in HDFC Securities is a process where a trader or investor uses their shares as collateral to obtain funding from a broker or bank. Here are some points to understand the concept of pledging shares:
- Pledging of shares is a way to obtain funds by using your shares as collateral with a broker or bank.
- The process involves transferring the ownership of the shares to the broker or bank,
who holds them as security until the borrowed amount is repaid. - The amount that can be borrowed against the shares depends on the value of the shares
and the margin percentage that is set by the broker or bank. - There are two types of pledges: Intraday pledge and Overnight pledge.
In an Intraday pledge, the shares are pledged for a single trading session, while in an Overnight pledge, the shares are pledged for a longer duration. - The pledging of shares is subject to various rules and regulations set by the stock exchanges and regulatory bodies.
- The pledging of shares can be done online through the HDFC Securities trading platform.
- The shares that are pledged cannot be sold or transferred until the pledge is released or settled.
- In case of default in repayment of the borrowed amount, the broker or bank has the right to
sell the pledged shares to recover their dues. - It is important to carefully read and understand the terms and conditions before pledging your shares to avoid any misunderstandings or legal issues.
- Pledging of shares can be a useful tool for obtaining funds for trading or investments, but it also involves risks and should be used judiciously.
To pledge shares in HDFC Securities, you can follow these steps:
- Log in to your HDFC Securities trading account using your username and password.
- Click on the "Portfolio" tab on the homepage.
- Select the shares that you want to pledge from your portfolio.
- Click on the "Pledge" option under the selected shares.
- Enter the quantity of shares that you want to pledge.
- Choose the type of pledge that you want to create: Intraday or Overnight.
- Enter the margin percentage that you want to pledge for the selected shares.
- Confirm the details of the pledge, including the margin percentage, quantity of shares, and type of pledge.
- Click on the "Confirm" button to complete the pledge process.
- Once the pledge is confirmed, you will receive a notification with the details of the pledge.
Here’s a table that tells you how to use web-portal & mobile app to initiate a pledge (post login).
Web Portal > Under Equity Tab > Demat Balance > Select the stock that need to be pledged > Click on Hold > Select Block Type as Pledge > Enter the Quantity > Click on Hold
Mobile App > Under More Tab > Portfolio > Demat Balance > Select the stock that need to Pledged > Select hold type as Collateral/Pledge > Enter the Quantity > Click on Hold
Again, the un-pledging of shares can be initiated from the web as well as mobile platforms.
This is just a one-off exercise and involves no links/OTPs.
Naturally, we will execute your un-pledge request only if your account position is calculated
to be compliant with margin requirements after the un-pledging is done.
Web Portal > Go to the Limit Tab > Select Unpledge Collateral > Enter the stock you want to Unpledge > Enter quantity > Click on Submit / Un-pledge
Mobile App > Go to the More section > Choose Account > Choose Collateral Hold / Release > Select the stock which needs to be un-pledged > Enter quantity > Click on Submit / Un-pledge
Pros and Cons
Here's a table outlining the pros and cons of pledging shares in HDFC Securities:
| Pros | Cons |
|---|---|
| Access to Funds: Pledging of shares can provide access to funds that can be used for trading or investments without having to sell the shares. | Risk of Default: If the borrower is unable to repay the borrowed amount, the broker or bank has the right to sell the pledged shares to recover their dues. |
| Lower Interest Rates: Pledging of shares can often result in lower interest rates compared to other forms of borrowing. | Possibility of Loss: In case of a decline in the value of the pledged shares, the borrower may be required to provide additional collateral or cash to cover the margin requirements. |
| Flexibility: Pledging of shares can be done for short-term or long-term periods, providing flexibility in terms of the duration of the pledge. | Restricted Trading: The pledged shares cannot be sold or transferred until the pledge is released or settled, which can restrict the trading activities of the borrower. |
| No Need to Liquidate Shares: Pledging of shares allows the borrower to obtain funds without having to sell their shares, avoiding potential losses due to the sale of shares at unfavorable prices. | Margin Calls: The lender can call for additional margin to be deposited in case of a decline in the value of the pledged shares, which can lead to additional financial strain on the borrower. |
| Tax Benefits: In some cases, interest paid on the loan obtained through pledging of shares may be tax-deductible. | Ownership Transfer: During the pledge period, the ownership of the pledged shares is transferred to the lender, which can result in a loss of control over the shares for the borrower. |
FAQs
- Q: Can I pledge shares held in other demat accounts with HDFC Securities?
A: No, you can only pledge shares held in your HDFC Securities demat account.
- Q: How do I pledge my shares in HDFC Securities?
A: To pledge your shares in HDFC Securities, you need to log in to your account, go to the 'Portfolio' section, select the shares you want to pledge, and click on the 'Pledge' button.
- Q: What are the benefits of pledging shares in HDFC Securities?
A: Pledging shares in HDFC Securities allows you to avail of margin trading facilities and loans against your shares. This can help you leverage your investments and generate higher returns.
- Q: What is the interest rate charged on loans against pledged shares in HDFC Securities?
A: The interest rate charged on loans against pledged shares in HDFC Securities varies depending on the loan amount and the tenure of the loan. It is best to check with HDFC Securities for the current interest rates.
- Q: What happens if the value of my pledged shares falls below the required margin?
A: If the value of your pledged shares falls below the required margin, HDFC Securities may ask you to provide additional collateral or sell some of your shares to maintain the required margin.
- Q: Can I sell my pledged shares in HDFC Securities?
A: No, you cannot sell your pledged shares in HDFC Securities until you release the pledge.
- Q: How do I release the pledge on my shares in HDFC Securities?
A: To release the pledge on your shares in HDFC Securities, you need to log in to your account, go to the 'Portfolio' section, select the shares you want to release the pledge on, and click on the 'Release' button.