Pledging of shares means taking loan against the shares which one holds currently.This can be done by promoter and investors both.Shares which an investor owns are considered to be assets and banks consider them as a form of security to raise loans.When an investor buys shares from market then those shares are transferred to his demat account which are known as his demat holdings. These holdings are his clear holdings and there is no third party interest in those shares as investor has already paid the entire value of shares to buy them. When emergency occurs or market is highly volatile then shares can be pledged to raise funds. To pledge shares investor or promoter has to offer them as collateral to bank or non-banking financial institution for the exchange of loan. Some important implications of pledging of shares 1) Companies which have high promoter holdings , pledging of shares is very common with them. When interest rates are rising then promoters tend t...
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