When Can Pledged Stocks Be Invoked and What Happens Afterwards?
Pledged stocks can be automatically unpledged or invoked in specific situations defined by clearing corporations and our risk management policies. These measures are designed to ensure compliance with regulatory limits and to safeguard traders from excess losses.
Where do pledged stocks go?
When you pledge your stocks, they are not transferred to us but are instead sent to the exchange. The exchange releases the margin corresponding to these stocks, and we credit this pledge margin to your trading account. This ensures your stocks remain safe and under the custody of a regulated exchange.
For a step-by-step guide on how to pledge your stocks, refer to this article.
1. Clearing corporation limits
Clearing members have pre-set limits defined by the Clearing Corporation regarding how many shares of a specific company can be accepted as pledge.
- If this limit is exceeded, the extra pledged shares are automatically unpledged and returned to your Demat account.
- Example: If the maximum limit is 10,00,000 shares of RIL and you pledge 11,00,000 shares, only 10 lakh will be accepted. The remaining 1 lakh shares will be unpledged and credited back to your account on the following trading day.
- You’ll receive an email notification whenever such automatic unpledging occurs.
2. Risk management invocation
If you use pledged margins for trading and your account shows a debit balance (negative funds), you must clear it by transferring additional cash.
- If you fail to add funds, our Risk Management System (RMS) may invoke the pledge, i.e., sell your pledged holdings to recover the shortfall.
- This action is not taken immediately — you are first informed via phone call and email.
- If you have open positions, RMS will first attempt to square them off before invoking your pledged shares.
Key points to remember
- Pledged stocks are held safely at the exchange, not with us.
- Automatic unpledging happens when clearing corporation share limits are crossed.
- Invocation occurs if you fail to clear debit balances arising from pledged margin usage.
- You will always receive prior notification before pledged shares are invoked or sold.
What if...
| Scenario | Solution |
|---|
| My pledged shares were automatically unpledged | This happens when clearing corporation limits are exceeded. The excess shares are safely credited back to your Demat account on the next trading day. |
| I received an email about invocation of pledged shares | Add the required funds immediately to clear your debit balance. Doing so may prevent RMS from selling your pledged shares. |
| I have open F&O positions and RMS invoked my shares | RMS first attempts to square off your positions. If losses remain, pledged shares may be sold to recover the shortfall. |
| Invocation happen without notice | No. You’ll always receive advance intimation via phone and email before pledged shares are sold. |
Last updated: 05 Dec 2025
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