Skip to content

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

Under the depository framework, which feature of hypothecation differs from a pledge where the lender holds a lien on securities?

In hypothecation the borrower keeps possession and ownership of the securities while creating a charge in favour of the lender. In a pledge, control of the securities is given to the pledgee. No outright transfer of ownership occurs in hypothecation.

  1. AHypothecation requires the securities to be physically delivered to the lender
  2. BIn hypothecation, the borrower retains possession of the securities while creating a charge in favour of the lenderCorrect
  3. CHypothecation cannot be used for any financial asset
  4. DIn hypothecation, ownership passes outright to the lender

Explanation

Hypothecation creates a charge over the asset while the borrower keeps possession and ownership, unlike pledge where possession or control passes to the lender. Ownership does not pass outright and physical delivery is not required.

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