How-to pledge Sovereign Gold Bonds SGB collateral margin CDSL Zerodha

How to pledge Sovereign Gold Bonds (SGBs) on Zerodha for margin

From WebNotes, a public knowledge base. Last updated . Reading time ~12 min. Level: Intermediate.

Sovereign Gold Bonds can be pledged on Zerodha for collateral margin , the same way approved stocks, exchange-traded funds and mutual funds can. If you hold SGBs in your demat account, you can put them to work as collateral for trading rather than leaving them idle until maturity, without selling the bonds and without giving up the interest they pay. This guide walks through checking that your bonds qualify, placing the pledge request on Console , authorising it on the CDSL page with an OTP, and understanding the haircut and charges that apply.

The mechanics are identical to pledging any other security, because SGBs go through the same margin pledge system that took effect in 2020. If you have not pledged before, the broader walkthrough of how to pledge holdings for margin and the eligibility hub on which securities can be pledged on Zerodha give the full picture. This page focuses on the SGB-specific points: eligibility, the gold-bond haircut, and the interest that keeps coming to you.

Conflict-of-interest disclosure. This guide is published by the WebNotes Editorial Team for informational purposes and is written independently. WebNotes operates a Zerodha account-opening referral programme, disclosed on the pages that carry the referral link; this guide does not carry it and earns no referral commission from the procedure described here.

Step-by-step procedure

The Procedure infobox above lists the eight steps in order. Each one is expanded below with the SGB-specific detail and the points where a pledge most often stalls.

1. Confirm F&O is active and your SGBs are in demat

Two conditions decide whether an SGB can be pledged at all. The Futures and Options segment must be activated on your account, because collateral margin is only useful for F&O and equity intraday trading, and Zerodha will not let you pledge if the segment is off. The bonds must also be sitting in your demat account in dematerialised form.

Sovereign Gold Bonds bought at issue can be held either in demat form or in RBI’s records through the Receipt of Holding. Only the demat holding can be pledged. If your SGBs are still in RBI’s books, you would need them credited to your demat account first. Bonds bought on the secondary market on the exchange settle into your demat account and can be pledged once settled, which is the trading day following purchase under the current T+1 settlement cycle.

2. Open the pledge page on Zerodha Console

Sign in to Console with your Kite username and password. Open the Portfolio menu, go to Holdings, and select the Pledge option, or open the dedicated Pledge page directly. Pledge requests can be submitted between 8 AM and 5 PM on trading days, so plan to place and authorise the request within that window on the same day.

3. Select the SGB and enter the quantity

Tick the checkbox next to the Sovereign Gold Bond tranche you want to pledge and enter the number of units. A single pledge request can hold up to 50 securities, so you can include several SGB tranches or mix them with stocks in one request. The collateral you will receive is the previous closing value of the bond minus its haircut , so the amount credited is lower than the bond’s market value.

4. Submit the request and note the pledge charge

When you submit, Zerodha applies a pledge charge of Rs 30 plus 18 per cent GST per ISIN, about Rs 35.40 for the bond, whatever the quantity. Our page on Zerodha pledge charges sets out the full fee picture, including that unpledging is free. The charge is per ISIN per request, so pledging one SGB tranche costs the same whether you pledge one unit or a thousand. Submitting the request only requests the pledge; the depository still needs your authorisation.

5. Open the CDSL authorisation page

Immediately after you submit, Zerodha directs you to the CDSL authorisation page, and CDSL sends a link to the mobile number and email registered with your demat account. Because you are pledging without a power of attorney (POA) or a Demat Debit and Pledge Instruction (DDPI) mandate, this CDSL step is what actually marks the pledge in the depository. The dedicated walkthrough of how to authorise a pledge on CDSL covers this step in more depth.

6. Generate and retrieve the OTP

On the CDSL page, confirm your PAN or the pre-filled identifier, review the SGB tranche and quantity, and generate the OTP. Check that the details match the request you placed on Console. CDSL then sends a one-time password to your registered mobile and email. Retrieve it quickly, since the OTP is valid only for a short window, and use the resend option on the same page if it does not arrive rather than abandoning the request.

7. Enter the OTP and authorise the pledge

Enter the OTP on the CDSL page and submit. This consent tells CDSL to mark the pledge in favour of Zerodha Broking Limited while the bonds stay in your own demat account. An on-screen confirmation appears once CDSL accepts the authorisation, and the request status on Console moves to SUCCESS.

8. Confirm SUCCESS and check the collateral margin

Return to Console and confirm the request shows SUCCESS rather than PENDING or OVERDUE. After a successful authorisation, the collateral margin usually reflects in your Kite Funds tab within a few minutes. Zerodha’s pages quote a window in the region of five to fifteen minutes depending on the instrument, so treat a few minutes as the realistic expectation. The credited amount is listed separately from your cash balance under Funds.

What Sovereign Gold Bonds are and why they qualify

Sovereign Gold Bonds are government securities issued by the Reserve Bank of India on behalf of the Government of India, denominated in grams of gold, that pay periodic interest and track the price of gold. Because they are government securities held in demat form, they sit in the same category of pledgeable instruments as approved stocks, ETFs, mutual funds, treasury bills and other government securities. Our reference note on Sovereign Gold Bonds covers the coupon, tenor and redemption terms in full.

Only the SGBs on Zerodha’s approved list can be pledged. That list is controlled by the clearing corporation, not by Zerodha, and is published with the collateral value at zerodha.com/approved-securities. If a particular SGB tranche is not on the list, no amount of authorising will create a pledge, so check the list before you start. The same rule governs every eligible instrument, as set out in which securities can be pledged on Zerodha .

The haircut on a pledged SGB

The haircut is the percentage deducted from the bond’s value to arrive at the collateral margin. It is not a fee and it does not reduce what your bonds are worth; it is a risk buffer that protects the broker and the clearing corporation against price moves. Zerodha’s help page illustrates SGBs with a 10 per cent haircut, so pledging Rs 100 of SGB gives about Rs 90 of collateral, while the bond itself stays worth Rs 100.

Treat that 10 per cent as an illustration, not a fixed rate. Each approved instrument carries its own haircut, and the live figure for every SGB tranche is published on the approved-securities list. The concept, and why more volatile securities carry larger haircuts, is explained in the haircut on pledged securities . Do not assume today’s number from an old figure; read the current value before you size a position against it.

How the collateral margin can be used

Collateral margin from pledged SGBs is added to your total Kite margin and shown separately under Funds. It can be used for equity intraday trading, trading futures, and writing or shorting options. It cannot be used to buy stocks or ETFs for delivery, and it does not count toward your withdrawable balance.

Two limits matter once you start trading against it. For overnight F&O positions, at least half of the required margin must come from cash or cash-equivalent collateral under the 50:50 cash-collateral rule ; the difference between the two components is set out in cash component versus collateral component . And buying options against collateral is a special case with its own daily charge, covered in buying options using collateral margin . For a fuller view of what the margin funds, see using collateral margin for F&O .

SGB interest and other benefits continue

Pledging an SGB does not change who owns it. Since the shares and bonds stay in your own demat account under the post-2020 system, pledging does not affect your entitlement to the bond’s payouts. The periodic SGB interest continues to be paid to you as usual, and any redemption at maturity is unaffected by an active pledge. The wider treatment of dividends, bonus issues and other events on pledged holdings is covered in pledged shares and corporate actions .

If you want to redeem an SGB or sell it, you would first release the pledge. Gold bonds and other cash-equivalent or government securities cannot be instant-sold the way ordinary pledged stocks can through the sell-pledged flow ; they must be unpledged first, then sold or redeemed.

Charges, and how to release the pledge

The only charge to pledge an SGB is Rs 30 plus 18 per cent GST per ISIN per request. There is no separate interest charge for pledging SGBs, since government securities sit in the interest-free, cash-equivalent group rather than the extra Group A stocks that attract a daily interest on the collateral used. When you no longer need the margin, unpledge the bonds through Console. Unpledging is free and, unlike pledging, does not need a fresh CDSL OTP authorisation.

The timing follows the standard unpledge cycle. An unpledge request placed before 3:30 PM makes the bonds available for trading the following day; after 3:30 PM, they are available the day after. There are no charges and no restriction on when you can place an unpledge request. Pledging SGBs sits alongside pledging other instruments such as mutual funds on Coin , and the safety of the whole arrangement is explained in are pledged shares safe on Zerodha , which traces the ownership rules back to the SEBI margin pledge rules of September 2020 .

Frequently asked questions

Can SGBs be pledged on Zerodha?
Yes. Sovereign Gold Bonds held in your demat account and on Zerodha’s approved-securities list can be pledged for collateral margin, using the same Console request and CDSL authorisation as stocks. The bonds stay in your demat account; only a pledge is marked in favour of the broker.
What haircut applies to a pledged SGB?
A haircut is deducted from the bond’s value to arrive at collateral margin. Zerodha’s help page illustrates SGBs with a 10 per cent haircut, so Rs 100 of SGB gives about Rs 90 of collateral. Check the live figure on the approved-securities list, as it can change.
Do I still earn SGB interest after pledging?
Yes. Pledging does not move the bonds out of your demat account, so the periodic SGB interest continues to be paid to you as usual. Pledging affects only the margin the bonds provide, not their ownership or their interest payouts.
How much does it cost to pledge an SGB?
Rs 30 plus 18 per cent GST per ISIN per request, about Rs 35.40, whatever the quantity. Unpledging is free. Pledging the same bond again on a later day is a fresh request and attracts the charge again.
Can I use SGB collateral to buy shares?
No. Collateral margin, including from SGBs, cannot be used to buy stocks or ETFs for delivery. It is meant for equity intraday, futures, and option writing. Buying options from collateral is a separate case with its own charge.
When can I get my SGBs back after unpledging?
An unpledge request placed before 3:30 PM makes the bonds available the following day; after 3:30 PM, the day after. Unpledging is free and does not need a fresh CDSL authorisation the way pledging does.

See also

External references

References

  1. SEBI circular SEBI/HO/MIRSD/DOP/CIR/P/2020/171, dated 9 September 2020, on the margin pledge and re-pledge system for client securities.
  2. Zerodha Support, “Can SGBs be pledged as collateral?”, Console pledging help section.
  3. Zerodha, approved list of securities for pledging (collateral value and haircut per instrument), zerodha.com/approved-securities.
  4. Reserve Bank of India, Sovereign Gold Bond Scheme, master documentation on issuance, interest and redemption.

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