General
What is PLEDGE? How does it work?
Pledge
Securities held in demat form can be pledged/hypothecated by the client to avail of loan/credit facility. Pledge of securities in NSDL depository requires that both the borrower (pledgor) and the lender (pledgee) should have a demat account with any of the DPs with NSDL and Pledge of securities in CDSL depository requires that both the borrower (pledgor) and the lender (pledgee) should have a demat account with any of the DPs with CDSL. The facility for Inter Depository pledge (where pledgor and pledgee has a demat account with different depositories) is not available.
Please note that financial transactions are handled outside the depository system. However, even after the securities are pledged, the pledgor continues to remain the beneficiary holder of those securities and will receive benefits of a corporate action, if any.
Following are the steps involved in Pledge/Hypothecation
- Creation of Pledge: The pledgor submits duly filled in Pledge Request Form to his DP for Creation of Pledge. On execution of the instruction by the DP a pledge order no. is generated for each ISIN.
- Confirmation of Pledge Instruction: The pledgee submits duly filled in Pledge Request Form quoting the Pledge Order No. (given by the pledgor) to his DP. On execution of the instruction the shares are marked as pledged in the pledgor's account. Pledge balances cannot be transferred.
- Closure of Pledge Instruction:The pledgor submits duly filled in Pledge Request Form to the DP for release of pledge. The pledgor does this after he has repaid the loan received from the pledgee.
- Closure Confirmation of Pledge Instruction: The pledgee submits duly filled in Pledge Request Form for confirmation of release of pledge to his DP. The pledgee would do this after ensuring that the pledgor has repaid the loan/credit facility extended to him. On execution of instruction the shares move from pledge balance to free balance in the Pledgor's account.
- Invocation of Pledge Instruction: The Pledgee submits duly filled in Pledge Request Form quoting the pledge order no. to his DP. On execution of instruction the shares move from the pledged balance of the Pledgor's account to free balance in the Pledgee's account. The pledgee does this when the pledgor has failed to repay the loan as per his obligations.
- Confirmation of Invocation of Hypothecation Instruction: The difference between a pledge and a hypothecation request is that whereas invocation of pledge can be done unilaterally by the pledgee, a confirmation of the pledgor is required in the case of invocation of hypothecation. For this pledgor submits duly filled in Pledge/ Hypothecation Request Form to the DP.
1. Form
There is a common form for all pledge requests given above. Typically, you would need to use it at the time of creation and at the time of closure of a pledge. Forms are available at any of the ICICI Bank branches.
2. Filling up the form
There is a common pledge/hypothecation form for all types of instruction. You must tick the appropriate box to indicate the instruction type.
You should clearly indicate whether the instruction is for Pledge or Hypothecation. Ensure that the Pledge form is completely filled up. Incomplete details may lead to rejection of the pledge request.
You should enter the DPID and Account number correctly on the space provided on the left-hand side of the form. You should enter the counter-party details correctly on the space provided on right hand side of the form.
You must fill up the Agreement number as provided by the pledgee. This refers to the pledge agreement signed between the pledgor and the pledgee.
You must fill up the Closure date as provided by the pledgee. This is referred in the pledge agreement signed between the pledgor and the pledgee.
You must fill up the ISIN & security name of the security to be pledged.
If the shares are under lock-in then you should fill up the lock-in reason and lock-in release date in the space provided.
The no. of securities should be filled up correctly in the space provided. In case of pledge creation, you must have free balance in the ISIN mentioned.
The instruction must be signed by all the account holder's and should be in the same order. The signature on the request should match with the specimen signature with ICICI Bank.
You must enter the Pledge order number for all types of pledge instructions other than pledge creation instruction.
3. Submitting the form
You can submit the pledge request at any ICICI Bank branch. The acknowledgement portion will be stamped and handed over to you after verification by the ICICI Bank official.
4. Execution of the Instruction
The instruction is executed at the Central Processing Office of ICICI Bank. On execution the balances move as mentioned above.
5. Rejection of Pledge Requests
Your request may get rejected for various reasons either at the Central Processing Office of ICICI Bank or by the counter-party. On a rejection at the Central Processing Office, you will be informed about the reason for rejection of the request.
You can submit a fresh request after resolving the reason for the rejection.
If a creation request is rejected by the counter-party the balance will get transferred from the pledged balance to the free balance.