Last Updated: Oct 13, 2022 Value Broking 5 Mins 2.4K

Margin trading allows you to pay your margin as cash. You can even provide stock as collateral. The question that comes to mind is how to mark stock as collateral. To mark stock as collateral efficiently, you need to understand it. Then, you can go for an indirect way to monetize your idle assets held in your Demat account. With a detailed look at pledging stock as collateral, you can come to know why you should offer stock as collateral and the way to do it. 

Pledging shares as collateral means making your stocks work effectively to leverage higher yields. To improve your return on investment (ROI), you would have to look for trading opportunities in the market to capitalize on idle shares in your Demat account.

You can avail of this opportunity in a strong bull market. You can take significant positions even during normal conditions. Then, after you offer your shares as collateral, you can sell them when you see an opportunity in the rising market.

There is also a need for a Demat account to perform it. If you have not opened your Demat yet, you must do it through any India’s depository participant (DP). You may wonder whether going for offering stock as collateral is challenging. But offering stock as collateral is not only simple but also seamless; all you need to have proper knowledge about it. 

Mark any Stock as Collateral

Various features come with offering stocks as collateral. Here are some of the most crucial ones you should pay attention to. 

  • You can unlock your stock value. It is also possible to unlock the value embedded in the market value of your holdings. There is no need for you to sell the shares. You can eliminate your worry about transaction costs and tax implications by pleading for shares. 
  • It is possible to enter the F&O segment for trading using the collateral value of the equity holdings. 
  • In this approach, you can build a trading limit with your existing stocks in the Demat account. 
  • You can use a cash margin account to avail of this facility. 
  • There is no need to think about the availability of funds & liquidity or alternate uses of funds.

Steps on How to Pledge Stock as Collateral

To reach the point where you offer the shares as collateral, you need to follow a short and quick process before it.

Now let’s focus our attention on the process flow involved in pledging shares as collaterals.

  1. You must look for a stockbroker to avail of the system of offering stock as collateral. You will have to look for the stockbroking firm you chose that provides this facility on which platforms. Nowadays, most stockbroking firms offer this facility on almost every platform like the PC, laptop, mobile, and tablet. 
  2. While deciding on pledging shares as collateral, you need to look at your stocks in your Demat account. Because offering shares as collateral depends upon the stock in the Demat. 
  3. You must visit the Demat balance, and after that, you will have to choose the specific stocks you want to pledge. Then, you will see that the system has marked a pledge in the shares you went for. You will accordingly receive the limit by the system. There are two options for pledging stock in your Demat- you can offer all the shares of a particular stock or a part of the shares. Remember that you can’t pledge T2T shares, and you can only offer shares when your Demat account has clear credit.
  4. You will have to understand that you have just completed the pledging request. But authenticating this is still pending, and you will have to do it now. You will get a link in your registered email  ID or phone number from your Depository. After clicking on the link, you will have to enter your PAN and Demat account number for authentication. Then, you must read all the details mentioned in it. When you have completed reading it, you will have to click on the “Ok” button. You will receive your one-time password (OTP) in your registered mobile phone number and Email ID. You will have to enter the OTP number as requested to complete authentication and confirmation at your end. This process hardly requires 10-12 minutes if you manage to provide all the required data in a proper time.
  5. After authentication from your side, your pledge limits will get activated within 2-3 hours from your broker’s end. 

After going through all the steps in this process, you can start trading on margin or in the Futures & Options.

Benefits of Pledging Shares

Here are the benefits of offering shares as collateral- 

  • It is almost like a zero-cost kind of short leverage
  • After pleading for your shares, you can still sell them.
  • You can quickly fulfill your short-term fund’s requirements. For example, you recognize a trading opportunity, but you are without enough funds to go for it. Here you will have to offer shares as collateral and build a limit for it.
  • You will get a higher purchasing power by leveraging your stock’s value.

What is Collateral Sell?

In the collateral sell facility, you can sell the stock you have pledged online for limits. There will be the adjustment of trading limits in an accordance manner. 


One of the significant advantages of providing stocks as collateral is making profits considerably. You can increase your stock holdings’ return on investment (ROI). 

Frequently Asked Questions (FAQs)

You can have cash-margin positions or futures and options positions to pledge of stock as collateral and leverage your stock value in your Demat account.

To hold the position continuously, you must pledge the shares purchased under the Margin Trading Facility (MTF). Make sure to do it by 9:00 PM on the day you have purchased the stock. After failing to do it, it will get closed on T+7 days. It is mandatory as per the SEBI guidelines.

You can use either cash or stocks in your Demat account as collateral to get higher exposure in the market.