NISM Certifications · NISM-Series-VI: Depository Operations · Special Services - Pledge and Hypothecation
A pledgor has defaulted on a loan. The pledgee wants to realise the security. Which action does the pledgee initiate through its DP?
The pledgee initiates a pledge invocation through its DP. Invocation moves the pledged securities from the pledgor's account to the pledgee's account so the lender can recover dues. Pledge closure is used instead when the loan is repaid and the securities are released back.
- APledge closure request
- BPledge invocationCorrect
- CPledge rejection
- DFreeze of the pledgee account
Explanation
On default the pledgee invokes the pledge, after which the pledged securities are moved from the pledgor's account to the pledgee's account. Closure is used when the loan is repaid and securities are released to the pledgor.
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