I will try to explain from what i know, i may be completely wrong, but bear with me for a minute.
- Pledging of securities: These securities are approved list by NSE that one is able to pledge to the broker where the broker provides margin to take trades. As the margin is not given to do anything else, the broker and NSE will have to earn from the trading you do pledging your security.
Banks charge interest when you take money to do something else. Let’s take example of credit card. Banks extend you line of credit till the end of cycle free of cost. They will gain from the transactions you do using that credit card. Well if you dont pay the bill in due date you will be charged hefty interest. Also when you withdraw money from ATM using the said credit card you’ll have to pay interest.
Just like that when you pledge your security and do trades, you are making them money from trading activity. When your margin goes negative you will be charged interest on the outstanding amount.
If you use it wisely you can also benefit while benefiting them.
Pledging for collateral is not like cash where you can buy in CNC or buy options. It is beneficial only if you are intraday, futures trader or option seller.
I dont know how it works internally to explain in detail. But i think you pledge your security with Zerodha so Zerodha is the bank here.
This is a good thread relating to the topic, if you have time go through this, it might help you in clearing some other doubts.