What is Pledge in Groww?

If you're investing in stocks and using the Groww app, you might’ve seen an option called "Pledge" or "Pledge for Margin". But what exactly is pledging? So here we will understand what is Pledge in Groww in this blog.

What is Pledging in Groww?

Pledging means borrowing money using your stocks as security. You're not selling them. You're just saying to Groww: “Here, hold my stocks for now and give me some money or extra margin to trade.”

You still own the stocks, but you can’t sell them until you unpledge. It’s like giving your gold chain to a bank for a loan. The bank keeps the chain safe, and you get money. Later, you can take your chain back by returning the money. You can pledge:

Stocks (like Infosys, Reliance, HDFC)
Mutual Funds (only selected ones)
ETFs
SGBs (Sovereign Gold Bonds)

How Does Pledging Work?

You select the shares or mutual funds you want to pledge. Groww gives you margin (extra buying power) or funds based on the value of those shares. This money can be used to buy more stocks or trade in Futures & Options (F&O). But remember:

The shares are locked while pledged.
You must repay the borrowed amount (plus interest if applicable).
If you fail to maintain your margin, Groww can sell your shares.

What is a Haircut in Pledging?

Haircut is the amount reduced from your stock’s value when calculating how much money you’ll get. For example, If your shares are worth ₹5,00,000 and the haircut is 20%, You’ll get ₹4,00,000 as margin or loan.

Formula: Margin Given = Total Value – (Total Value × Haircut %)

Haircut protects Groww from losses if share prices fall suddenly.

Why Do People Pledge Shares on Groww?

Here’s a simple example: Ramesh has shares worth ₹2,00,000 in Infosys, Tata Motors, and HDFC Bank. The market dips, and he wants to buy more, but doesn’t have cash. Instead of selling, he pledges his shares, gets margin, and buys more stocks. Here are some common reasons to Pledge:

To get extra funds without selling shares.
To grab good opportunities during market dips.
To trade in Futures & Options.
To meet short-term cash needs.

Benefits of Pledging Shares in Groww

Pledging your shares comes with some solid advantages, especially if you want quick funds without selling your investments. Here's how it helps:

1. Lower Interest Rates

When you pledge shares, the interest charged is usually much lower than personal loans or credit cards. This means you pay less in the long run, and your profits stay higher. For Example, if you take a personal loan at 14% interest, pledging might only cost you 9–10%.

2. You Keep Ownership

Even after pledging, you still own the shares. You continue to get:

Dividends (if the company gives)
Bonus shares (if issued)
Voting rights (if applicable)

It’s like giving your stocks for "safe custody," not selling them.

3. Tax Advantage

Since you're not selling the shares, you don’t pay capital gains tax. You get the funds without triggering any tax on profits.

4. Quick and Easy Access to Funds

You get fast access to cash without disturbing your long-term investments. You can use this money for:

Buying more stocks (during dips)
Trading in Futures & Options
Handling short-term financial needs

It’s like using your parked assets to grab new opportunities, without selling anything.

How to Pledge Shares in the Groww App?

Pledging shares in the Groww app is simple. Just follow these steps:

Open the Groww app and go to the ‘Stocks’ section.
Tap on ‘My Holdings’ to view your current shares.
Select the stock you want to pledge.
Tap on the ‘Pledge for Margin’ option.
Enter the number of shares you want to pledge and confirm.
Approve the request by entering the CDSL OTP sent to your registered mobile/email.

How to Unpledge Shares in Groww?

Once you're done using the margin or no longer need the pledged funds, follow these steps to unpledge your shares:

Open the Groww app and go to ‘My Holdings’.
Tap on the pledged shares you want to unpledge.
Click on the ‘Unpledge’ option.
Confirm the unpledge request.
Wait for 1-2 business days for the shares to be released.

After that, your shares will be fully back in your control, and you can sell or transfer them as usual.

What If You Don’t Repay on Time?

If you don’t maintain enough margin or fail to return the borrowed amount, Groww has the right to sell your pledged shares, without asking you. This situation is called a margin call, and it usually happens when the value of your pledged shares drops too much. What Can Go Wrong:

Your shares may be forcefully sold at a loss
You can lose ownership of the stocks
You might end up with less money than you started with

Note: Only pledge your shares if you're clear about the risks. It’s not free money, it’s a loan with consequences.

Also, Check - What is MTF in Groww

Conclusion

In conclusion, pledging in Groww is a smart way to raise quick money or trade more without selling your stocks. It’s like keeping your shares on rent for cash, but you must return the money. Use it only if you understand the risks and have a clear plan. Don’t treat it like free money. And always keep track of your margin balance.