What is collateral in demat account? Once the funds are transfred do we get it back after closing the demat account?

Instead of keeping cash in your account for trading, you can pledge your securities to the broker, who will give margin against such securities and you can trade using such margins. Such shares will be held by the broker till you close your positions. If there’s any loss you make by trading with such margins, you have to repay the money, else the broker can sell them to recover losses. If you make good the money, you can choose to withdraw these shares and receive them back to your own demat account.

Do note that you will be entitled to receive benefits of all corporate actions of the shares you have pledged as you are the ultimate beneficial owner of the pledged shares.

1 Like