What is margin pledge?

Margin pledge is a SEBI-mandated process that lets you use shares you already own and hold in your demat account as collateral to generate margin for trading, particularly F&O, instead of having to deposit additional cash. You formally pledge specific shares through the depository’s pledge system (via NSDL or CDSL, initiated through your broker), and in return receive a margin value against those shares, calculated using a haircut, meaning the margin you get is less than the full market value of the pledged shares, to account for potential price volatility. This process replaced an older, less regulated system where brokers held Power of Attorney (PoA) over client demat accounts, since SEBI introduced margin pledge specifically to give investors more direct control and visibility over how their shares are being used as collateral. Pledged shares stay in your demat account (they’re not transferred out), but they’re marked as pledged and typically can’t be sold until unpledged first.