NISM Certifications · NISM-Series-VI: Depository Operations · Special Services - Pledge and Hypothecation
A client's shares are pledged to an NBFC. The client repays the loan in full. Which step releases the shares so that they become free in the client's account?
The pledgee initiates a closure request through its DP once the loan is repaid, and the closure is confirmed in the depository system. The shares are then unblocked and become free in the pledgor's account. The pledgor alone cannot release them.
- AThe pledgor DP must close the account
- BThe pledgee initiates a pledge closure request, which is then confirmedCorrect
- CThe issuer company passes a board resolution
- DThe stock exchange cancels the trades
Explanation
Closure is initiated by the pledgee, who holds the security interest, through its DP, and is confirmed in the depository system. After this the shares are unblocked. The pledgor cannot unilaterally release them.
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