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

In a depository pledge transaction, which party is the 'pledger' and which is the 'pledgee'?

The pledger is the beneficial owner who offers securities as collateral for a loan, while the pledgee is the lender who accepts them as security. The borrower creates the pledge, and the lender holds the security interest.

  1. AThe pledger is the lender and the pledgee is the borrower
  2. BThe pledger is the beneficial owner who offers the securities, and the pledgee is the lender who accepts them as securityCorrect
  3. CBoth are the depository participants of the borrower
  4. DThe pledger is the issuer and the pledgee is the depository

Explanation

The pledger is the BO who creates the pledge by offering securities as collateral. The pledgee is the lender (such as a bank or NBFC) in whose favour the pledge is created. Reversing the roles is the common error.

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