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NISM Certifications · NISM-Series-VI: Depository Operations · Special Services - Debt Instruments and Government Securities

A client wants to pledge his demat holding of Government securities to obtain a loan. As the DP, you should tell him that:

The pledge is created through an instruction in the depository system, and the securities stay in the client's account but are blocked. Ownership does not move to the lender unless the pledge is invoked, and no rematerialisation is needed.

  1. ASecurities are pledged by creating a pledge instruction in the depository system, and the securities remain in the client's account but are blockedCorrect
  2. BSecurities must first be rematerialised
  3. CSecurities are transferred to the lender's account permanently
  4. DPledge is not possible for debt securities

Explanation

In a depository pledge, the securities stay in the borrower's account but are marked as pledged and cannot be used until the pledge is closed or invoked. No rematerialisation is needed and ownership is not transferred permanently. Debt securities in demat form can be pledged.

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