You can pledge your existing holding shares as collateral to obtain funds from Zerodha. The collateral margin will be available on T+1 day for the stocks that are pledged before 5 PM.
You can use the collateral margin to trade Equity Intraday trading, Futures & Options writing (equity and currency F&O). You cannot trade commodity futures and options using collateral margins.
What you can do with pledged shares
|Equity Stock delivery
You must have 50% of the margin requirement in cash or cash equivalents to use the collateral margin for trading. Otherwise, you have to pay interest at 0.035% per day on the cash component funded by Zerodha. In case you don’t fund your trading losses (either equity or F&O) by cash, interest on the debit balance will be charged at 0.05% per day.
Equity stocks provide a “collateral equity” margin on pledging and pledged ETFs and mutual funds provide collateral (liquid funds).
For example, you have Rs 4 lakh in cash & stock portfolio worth Rs 5 lakh.
- You will receive a Rs 4 lakh collateral margin after pledging the stocks assuming a 20% haircut.
- Now you will have Rs 8 lakh to trade in equity & F&O.
- But you will not receive any return on Rs 4 lakh cash.
- Invest Rs 4 lakh in cash equivalents like LIQUIDBEES (Complete list of ETFs & mutual funds that can be pledged).
- Pledge LIQUIDBEES to receive a cash equivalent margin of Rs 3,68,000 (8% haircut).
- Add more than Rs. 32,000 cash to your Zerodha account to meet the 50% cash or cash equivalent requirement.
- You will receive the return on LIQUIDBEES while using the margin to trade in equities.
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How to Pledge Shares in Zerodha
Step 1: Login to your Zerodha account and go to the console
Step 2: Click on Portfolio and then on Holdings.
Step 3: Go to the Stock that you want to pledge and Click on Pledge for margin.
Step 4: Agree to the terms of service for pledging and enter the quantity to be pledged.
Step 5: Click on Submit.
Note: Zerodha processes pledge requests at 2:00 PM and 5:00 PM only on the equity market open days. The collateral margin will be available on T+1 day for the stocks that are pledged before 5 PM.
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Authorizing the Pledge Request on CDSL
Once you have submitted the share pledging request, you need to authorize the pledge request on CDSL to complete the pledge process.
Step 6: Check the registered email ID or mobile number for the CDSL’s notification.
You will receive the authorizing emails from both Zerodha and CDSL. You can authorize the pledge request using the provided link from the email.
Step 7: Log in to CDSL India Portal using PAN.
Step 8: Click on the checkbox with the pledge details.
Step 9: Click on Generate OTP.
Step 10: Enter the OTP and click on Submit.
You will be charged ₹30 + GST per pledge instrument, irrespective of the quantity pledged. There are no charges for unpledging. You can check the details of all Zerodha account charges.
How is the Pledged Share Value Determined
The pledge share value (collateral amount) is calculated from the previous closing price of the securities after a % deduction called a haircut. You can check the applicable haircut % in this list available here.
You can use the collateral margins for Equity Intraday trading, futures & options writing (equity and currency F&O). You cannot trade commodity futures and options using collateral margins.
For example – You have ITC stocks valued at Rs 1,00,000. Haircut on ITC stocks is 12.5%. If you pledged all the stocks, you will get Rs 87,500 collateral margin to use for trading.
What Happens to Pledged Shares During a Margin Call
A margin call is a situation when the borrower fails to maintain the required margin for the pledged shares. This can happen due to a fall in the market value of the shares or an increase in the margin requirement. In such a scenario, Zerodha has the right to liquidate the pledged shares to recover the loan amount.
Zerodha usually sends reminders to the borrower to maintain the margin before initiating the liquidation process. The borrower can also deposit additional funds or securities to meet the margin requirement and avoid the margin call.
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How to Check the Pledged Shares and their Status in Zerodha
To check the pledged shares and their status in Zerodha, the borrower needs to log in to their account and navigate to the ‘Holdings’ section. Here, they can view the shares they have pledged and their current status, such as whether they are active or released.
To view the pledged shares and their status on the Zerodha platform, follow these steps:
- Log in to your Zerodha account.
- Click on the ‘Portfolio’ tab.
- Select ‘Holdings’ from the dropdown menu.
- Click on the ‘Collateral’ tab to view the pledged shares and their status.
How To Unpledge Shares in Zerodha
Step 1: On the Holdings table in Console, you can see the pledged quantity marked next to the symbol name.
Step 2: Click on ‘Options’ and choose ‘Unpledge’.
Step 3: Enter the quantity you wish to get unpledged and click on ‘Submit‘.
Stocks will be credited to your demat account on T+1 day for unpledging requests placed before 2:00 PM. Any request after that will be processed on the next working day.
No, you can only pledge shares held in your Zerodha demat account.
Once you have repaid the loan amount and any applicable interest and charges, the pledged shares are released within 24 hours.
The maximum loan-to-value (LTV) ratio for share pledging in Zerodha is 50%.