What Types of Shares Are Eligible for Pledging?

Shares that can be pledged by individuals and companies seeking loans from banks and Non-banking Financial Companies (NBFCs) generally fall into two categories: 

Physical shares and dematerialized shares. However, not all shares the applicant holds can be pledged, and certain restrictions exist.

Eligible Shares

• Valid physical share certificates of reputed large-cap companies registered in the applicant’s name can be pledged after the original certificates and signed transfer forms are submitted.
• Demat shares of actively traded large-cap and some mid-cap companies held in the applicant’s own demat account can be pledged.

Ineligible Shares

• Due to their risky nature, small-cap, penny stocks, and shares not in the approved securities list cannot be pledged.
• If the member-wise limit set by the clearing corporation for security is reached, additional quantities cannot be pledged.
• Only shares held in demat accounts with an active derivatives segment can be pledged. Holdings in regular demat accounts without derivatives access cannot be pledged.
• Shares with a 100% Value at Risk (VAR) can also not be pledged as loan providers consider them too risky.

Financial institutions generally favour shares with:

• Healthy trading activity and robust market depth.
• Price stability and substantial market capitalisation.
• Membership in major indices such as Nifty 50 or Sensex.