NISM Certifications · NISM-Series-VI: Depository Operations · Special Services - Pledge and Hypothecation
Mr. Iyer pledges 500 demat shares of a listed company to a bank to obtain a loan. In depository terminology, who is the 'pledgor' in this transaction?
Mr. Iyer is the pledgor because he is the beneficial owner who offers his demat shares as security for a loan. The lending bank, which receives the security interest, is the pledgee. The depository participants only process the instruction.
- AThe bank that lends the money
- BThe depository participant of the bank
- CMr. Iyer, the beneficial owner who creates the pledgeCorrect
- DThe issuer company of the shares
Explanation
The pledgor is the beneficial owner who offers securities as collateral, here Mr. Iyer. The bank receiving the security interest is the pledgee. The DPs and issuer only facilitate or issued the shares.
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