Direct Answer
A Pledge of Dematerialized Securities is the creation of a security interest over electronic financial instruments (shares, bonds, mutual funds) held in a demat account, governed jointly by the Contract Act and the Depositories Act, 1996.
Electronic Pledge Mechanism:
• Creation: The pledgor (borrower) initiates a pledge request via their Depository Participant (DP).
• Confirmation: The pawnee (bank) confirms the request through their own DP.
• Constructive Possession: The depository (CDSL/NSDL) electronically “locks” the specified shares so they cannot be sold or transferred by the borrower, satisfying the legal requirement of delivering possession.
• Creation: The pledgor (borrower) initiates a pledge request via their Depository Participant (DP).
• Confirmation: The pawnee (bank) confirms the request through their own DP.
• Constructive Possession: The depository (CDSL/NSDL) electronically “locks” the specified shares so they cannot be sold or transferred by the borrower, satisfying the legal requirement of delivering possession.