A pledge is a facility that allows traders to use their existing stock holdings as collateral to get additional margin for trading. This is known as Pledge for Margin.

When you pledge your stocks, you receive collateral margin after a deduction called a haircut. The haircut is a percentage of the stock’s value that is deducted to manage risk in case the stock price fluctuates.
 

For Example:

• Suppose you have ₹1,00,000 in cash and stocks worth ₹3,00,000 in your trading account.
   
• If the haircut is 20%, the value of your pledged holdings after the deduction will be ₹2,40,000 (80% of ₹3,00,000).
   
• Now, your total available trading margin will be ₹3,40,000 (₹1,00,000 cash + ₹2,40,000 collateral margin).
   

The haircut percentage varies depending on the stock category and its risk level.