Are there any Interest charges while pledging shares

Brokers
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Are there any Interest charges while pledging shares. Am trying to pledge shares in aliceblue and it shows 24% per year.

Is this same across all brokers

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Hi @nivasgurunathan

The cost of pledging at Zerodha is Rs 30 + GST per pledge request. There is no cost for un-pledging.

Check more on this here : What is pledging and how does it work?

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Thanks for the reply Meher. Does pledging attract any interest per day or Year. I see alice blue is charging 24% per year so I wanted to know if am understanding it right or wrong

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There is no interest levied on pledging at Zerodha, Nivas. There is only a one time charge of 30 Rs + GST.

But, there’s one aspect that you need to take care of :

Exchanges stipulate that for overnight F&O positions, 50% of the margin needs to compulsorily come in cash or cash equivalent collateral, and the remaining 50% can be in terms of non-cash collateral margin .

If you don’t have sufficient cash margin and the shortfall is funded by non-cash collateral, there will be a delayed payment charge of 0.035% per day or 12.5% p.a on the shortfall in the cash margin requirement. Read more about the delayed payment (interest) charges here .

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Many Thanks Meher for your kind reply

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@Meher_Smaran Can u please explain about pledging of shares and in what senario do we incur interest cost from the broker.

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Hi @Meher_Smaran - Lets say if i pledged some shares and sold some option against that.
Would i be able to sell those stocks without closing my option position ?
Would zerodha be able to unpledge those on my behalf ?
If I have to first unpledge those before selling them, how much time it would take and if I am selling them do i have to first close the open option position against it and then sell them ?

Thanks in Advance.

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Hi @Piyush_S

Yes you can. The collateral margin will be reduced to the extent of the shares sold. Once the order has been executed, 80% of the sale credit is received in the account, similar to the sale of free holdings. But If you continue to hold any F&O positions, make sure that you have sufficient margins in your account as it could lead to margin shortfall in the account, which might lead to our risk management team squaring off positions

Yeah. Once you exit, Zerodha unpledges them instantly on your behalf

If you manually want to pledge request, you can do so from Console. You will have to place an unpledge request before 3:30 PM, and the shares will be available for trading the next day. Also, if you have an open position, you can only unpledge shares to the extent of unused collateral. More here: How to unpledge instruments?

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Thanks @Meher_Smaran for explaining it, it makes sense.
One more follow up question -
Would i be notified if the amount that is received by selling stocks is not sufficient to cover the margin ?

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Hi @Shaik_Mohammad_Ali

In simpler terms, Pledging is basically taking loan from your broker against the securities that you own.

You can read more on this here : What is pledging, and how does it work?

You can also learn more about Pledging by checking out this TradingQ&A thread:

Related to Pledging:

Exchanges stipulate that for F&O positions, 50% of the margin needs to compulsorily come in cash or cash equivalent collateral, and the remaining 50% can be in terms of non-cash collateral margin. If sufficient cash margin is not maintained and the shortfall is funded by the non-cash collateral, there will be a delayed payment charge of 0.035% per day or 12.5% per annum on the shortfall in the cash margin requirement.