SEBI clarifies that clients under Non-Discretionary Portfolio Management Services can pledge their securities for personal loans without it being classified as borrowing by the portfolio manager.
SEBI Clarifies Pledging Rules for ND-PMS Clients
The Securities and Exchange Board of India (SEBI) has issued a clarification allowing clients under Non-Discretionary Portfolio Management Services (ND-PMS) to pledge securities held in their demat accounts for personal borrowing. This decision comes in light of concerns surrounding the interpretation of existing regulations and the compliance burdens they impose on both clients and portfolio managers.
The regulator stated that as long as the decision to pledge is made entirely by the client, this action does not constitute borrowing by the portfolio manager. This is a significant distinction, as it provides clients with more flexibility in accessing funds while ensuring that portfolio managers remain compliant with regulatory expectations.
“This clarification aims to empower clients without compromising the integrity of the PMS framework,”
With this update, clients can leverage their holdings more effectively, allowing for personal financial management without unintended consequences on portfolio management agreements. Practitioners will need to inform their clients about these opportunities to optimize their asset utilization.
Citations
- SEBI (2026) Clarification on ND-PMS
