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Pledge invocation allows lenders to take over pledged securities if investors default, with depository fees applicable for the transaction.
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Pledge invocation happens when the borrower defaults on repayment or margin obligations. The lender (bank/broker) invokes the pledge, gaining rights over the pledged securities. The pledged shares are then transferred to the lender’s account, who may sell them to recover dues. Depositories levy a fee for invocation, charged to the investor or broker depending on agreement.
Key Points:
Triggered when borrower defaults.
Lender gains control of pledged securities.
Shares transferred to lender’s Demat account.
Depository charges apply.
Protects lenders from loss.
Answered on
