Skip to content

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

In a pledge of dematerialised securities under the depository system, who is the 'pledgor' and who is the 'pledgee'?

The pledgor is the borrower, who offers demat securities as collateral, and the pledgee is the lender, who accepts them as security for the loan. The lender holds a lien on the securities until the borrower repays the facility.

  1. AThe pledgor is the lender and the pledgee is the borrower
  2. BThe pledgor is the borrower who gives the securities as security and the pledgee is the lender who accepts themCorrect
  3. CBoth terms refer to the Depository Participant of the respective parties
  4. DThe pledgor is the depository and the pledgee is the issuer company

Explanation

The pledgor is the beneficial owner who creates the pledge by offering securities as collateral for a loan. The pledgee is the lender in whose favour the pledge is created. Reversing the roles, as in the first option, is the common confusion.

Did you get it right without looking?

One question tells you little. A timed set on Special Services - Pledge and Hypothecation shows your real accuracy, how long you take and where you lose marks.

Practise Special Services - Pledge and HypothecationFree diagnostic mock

More Special Services - Pledge and Hypothecation questions