In India’s stock market, your Demat account does more than just hold shares. It also allows you to use your investments to borrow money through a process called pledging. Many investors use this facility for trading on margin, personal loans, or emergency funds without selling their shares.
However, pledging and its reverse process — unpledging — often confuse new and even experienced investors. This easy-to-read guide explains both processes clearly, highlights their key differences, and walks you through step-by-step procedures.
What is Pledging in Demat Account?
Pledging means using your shares as collateral or security to borrow money from your broker or a bank/NBFC. Your shares remain in your Demat account but are “locked” or marked as pledged. The lender gets a right over them until you repay the loan.
This is very popular for:
- Getting margin funding for intraday or F&O trading
- Availing loans against shares (LAS)
- Meeting urgent cash needs without selling stocks
Important: Only approved securities (mostly liquid large-cap and mid-cap stocks) can be pledged.
What is Unpledging in Demat Account?
Unpledging is the reverse process. Once you repay the borrowed amount (principal + interest), the lender releases the shares back to your free holdings. The shares become available for trading, selling, or further pledging again.
Key Differences Between Pledging and Unpledging
| Aspect | Pledging | Unpledging |
| Purpose | To borrow money using shares as collateral | To release shares after loan repayment |
| Effect on Shares | Shares become blocked/pledged | Shares become free for trading/selling |
| Ownership | You still own the shares | You retain full ownership and control |
| Risk | Higher (margin calls if price falls) | Lower (happens after repayment) |
| Time Taken | Usually instant or same day | 1-3 working days |
| Charges | Pledge charges + interest on loan | Usually nominal unpledge charges |
| Who Initiates | You (borrower) | You (after repayment) or lender automatically |
Why Do Investors Pledge Shares?
Advantages:
- Get instant liquidity without selling shares
- Continue to benefit from dividends and corporate actions
- Often lower interest rates than personal loans (8-12% p.a.)
- No credit score impact if done through broker
Disadvantages:
- If share price falls sharply, you may get a margin call
- Forced selling of pledged shares if you fail to meet margin requirements
- Shares cannot be sold while pledged
Step-by-Step: How to Pledge Shares in Demat
- Login to Broker App (Zerodha, Groww, Upstox, Angel One, etc.)
- Go to Portfolio or Holdings section
- Select the shares you want to pledge
- Click on Pledge option
- Enter quantity and choose purpose (Margin / Loan)
- Confirm the pledge request
- Lender (broker) approves — shares move to “Pledged” status
- Funds are credited to your trading account instantly or within hours
Note: Some brokers allow one-click pledging. CDSL/NSDL also shows pledged quantity separately in your statement.
Step-by-Step: How to Unpledge Shares in Demat
- Repay the outstanding loan amount (principal + interest)
- Login to your broker app
- Go to Pledged Holdings section
- Select the shares and click Unpledge
- Confirm the request
- Lender processes the unpledge (usually within 1-3 days)
- Shares move back to your Free Holdings
Pro Tip: Always repay before unpledging to avoid rejection.
Important Things to Remember in 2026
- Pledge Haircut: Brokers apply a margin haircut (e.g., 20-50% depending on stock volatility). You won’t get 100% of the share value as loan.
- Re-pledging: Some advanced brokers allow re-pledging of already pledged shares (called re-hypothecation).
- Corporate Actions: You usually continue to receive dividends even on pledged shares.
- Tax Implications: No capital gains tax on pledging/unpledging. Tax applies only when you sell the shares.
- Charges: Most brokers charge nominal fees (₹15–₹50 per scrip) for pledging/unpledging.
Risks Involved in Pledging
- Market Volatility: A sudden crash can trigger automatic square-off.
- Over-Leverage: Borrowing too much can lead to big losses.
- Opportunity Cost: Pledged shares cannot be used for delivery trades until unpledged.
- Fraud Risk: Always use authorised brokers. Never share OTPs.
Best Practices for Safe Pledging & Unpledging
- Pledge only high-quality, liquid stocks.
- Keep loan-to-value (LTV) ratio below 60-70% for safety.
- Monitor your pledged holdings daily during volatile markets.
- Repay loans on time to avoid extra interest and margin calls.
- Maintain a separate emergency fund outside the market.
- Review your pledged status during your yearly Demat security audit.
- Understand your broker’s margin policy clearly.
Real-Life Example
Rahul holds 500 shares of Reliance Industries bought at ₹2,000. Current price: ₹2,800.
He pledges them and gets ₹8 lakh loan (after haircut).
After 6 months, he repays the loan and unpledges the shares.
He still owns the shares and benefited from price appreciation + dividends.
Conclusion
Understanding the difference between pledging and unpledging is essential for smart leverage in the stock market. Pledging helps you unlock liquidity without selling your investments, while unpledging restores full control once the loan is cleared.
Used wisely, these facilities can boost your trading power and provide financial flexibility. Used carelessly, they can magnify losses. Always borrow within your repayment capacity and maintain discipline.
Keep your Demat account secure, stay informed, and use pledging as a tool — not a trap. With the markets growing rapidly in 2026, mastering these processes will help you trade and invest more confidently.
FAQs: Pledging vs Unpledging in Demat Account
Q1. Can I sell pledged shares?
No. You must first unpledge them after repaying the loan.
Q2. How long does unpledging take?
Usually 1-3 working days. Some brokers do it faster.
Q3. Is there any cost for pledging shares?
Yes, small processing fees + interest on the borrowed amount.
Q4. What happens if share price falls after pledging?
You may receive a margin call and need to add more funds or pledge additional shares.
Q5. Do I receive dividends on pledged shares?
Yes, dividends are credited to your bank account as usual.
Q6. Which brokers offer easy pledging facility?
Zerodha (Margin Pledge), Groww, Upstox, Angel One, and 5Paisa are popular choices in 2026.
Q7. Is pledging safe?
It is safe if done with SEBI-registered brokers and within limits. Never over-leverage.
Q8. Can I pledge mutual funds or bonds held in Demat?
Some brokers allow pledging of mutual fund units, but bonds have limited facility.