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

A pledgor wants to close a pledge after repaying the loan. Which statement describes the standard procedure?

Closure is initiated by the pledgee, the lender, and confirmed through the depository system, after which the securities are unblocked in the pledgor's account. The pledgor cannot do this alone, and neither the issuer nor SEBI approves each closure.

  1. AThe pledgor alone instructs the DP to close it, and the pledge ends immediately
  2. BThe pledgee initiates the closure request, and the pledgor's DP confirms it, after which securities are unblockedCorrect
  3. CThe issuer company must approve the closure
  4. DSEBI must approve each closure

Explanation

Closure of a pledge is initiated by the pledgee, who holds the security interest, and then confirmed through the depository system. After confirmation the securities are released in the pledgor's account. The pledgor alone cannot close it, and neither the issuer nor SEBI approves closures.

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