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NISM Certifications · NISM-Series-VI: Depository Operations · Special Services - Pledge and Hypothecation

A borrower's pledge of demat shares in favour of a lender is to be closed after the loan is repaid. Which sequence is correct in the depository system?

Pledge closure is initiated by the pledgor through their DP, and the pledgee must confirm the closure. After the pledgee's confirmation, the pledged securities are unfrozen in the pledgor's account, ending the lender's security interest.

  1. APledgor requests closure, and the pledgee confirms to release the securitiesCorrect
  2. BPledgee alone requests closure and the pledgor confirms
  3. CIssuer company initiates closure
  4. DStock exchange initiates closure

Explanation

Closure of a pledge is initiated by the pledgor with their DP and then needs the pledgee's confirmation, after which the securities are unblocked. The reverse sequence describes invocation or other flows, not closure. Issuer and exchange have no role.

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