What is Pledging of Shares?
Pledging of shares refers to the practice of putting up of equity shares as collateral against loans. Once a pledge is created, it acts a lien and the pledgee has the right to recover all his/her dues against the pledge first before releasing the pledge i.e. unpledging the shares. In case of a default by the borrower, the pledge can be invoked for the recovery of these dues.
Watch this video to understand the pledging of shares
By whom are shares pledged?
Shares are pledged by:
- Promoters: Promoters of a Company can pledge shares with Banks, NBFC’s or Private parties in order to raise funds for various purposes. In case Promoters of a Company have pledged a significant amount of their holdings, the company can become a risky investment if the Lenders invoke the Pledge & dump the stocks. As a large chunk of stock floods the markets, there can be a significant drop in price, adversely affecting shareholder value. While this data is available in the Public Domain, it is often difficult for investors to collate such data. At SAMCO, we are trying to help investors by collating & updating this data through our SAMCO Pledge Monitor. Investors can check promoter pledging right from their Back Office.
- Investors: Investors who own company stock can also pledge shares with Banks, NBFC’s or Private. The reasons vary from investor to investor, some investors pledge shares in order to fund their trading, some pledge shares in order to obtain personal loans (especially from banks).
At SAMCO, with our IntraPlus product, Traders can pledge their shares with SAMCO in Order to avail margins against shares to for Intra-Day trading right from their Holdings Page in the SAMCO STAR Back Office.
Two salient features of IntraPlus are
- No Cash Collateral Ratio to be maintained.
- Ability to sell pledged shares in real time without having to unpledge them first.
What are Share Pledge Charges?
At SAMCO, A charge of Rs.69 (Rs.60 plus Service Tax of 15%) is charged per Pledge Request. Regardless of the Value or the Number of Shares being Pledged. Let us explain with illustrations:
- Ramesh wishes to avail margins against shares for trading with IntraPlus. He currently owns 1000 Shares of Reliance. He places a pledge request for the same. He will be charged Rs.69 to create the pledge.
- Suresh also owns 1000 shares of Reliance & wishes to avail margins with IntraPlus. He however pledges only 400 shares. He too will be charged Rs.69 to create the Pledge.
How are these pledge charges collected?
The pledge charges are debited to a client’s ledger on successful pledging of the shares. Since these are non-trade charges, they are not charged to the contract note of the client.
What are margins one can get on pledging of shares?
On the pledge of shares, a collateral margin is made available to the trader/investor. This margin is calculated as the sum of the value of the shares pledged after haircut.
Calculate the margin against shares on the IntraPlus Margin calculator.
How can I pledge my shares with SAMCO for trading limits?
You can pledge your shares with SAMCO from the SAMCO Back Office – SAMCO STAR.
Additional Reference Links
Intraplus – A Zero Balance Intraday Trading Account
Blog on IntraPlus – Zero Balance Intraday Trading Account
FAQ’s on IntraPlus