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

Meera wants to pledge her demat holdings to a lender and her pledge request is entered by her DP. What is the next step needed for the pledge to be confirmed in the depository system?

After the pledgor's DP enters the pledge instruction, the pledgee must confirm it through its own DP. Only on this confirmation does the depository mark the securities as pledged and freeze them in the pledgor's account.

  1. AThe pledgee must accept the pledge instruction, after which the securities are marked as pledgedCorrect
  2. BThe issuer company must approve the pledge in its register
  3. CSEBI must grant permission for each pledge
  4. DThe stock exchange must confirm the pledge in the trading system

Explanation

A pledge is initiated by the pledgor's instruction and is confirmed only when the pledgee confirms it through its DP. Only then are the securities blocked and marked as pledged. Issuer, SEBI or exchange approval is not required for each pledge.

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