Agreement number
The optional identifier a pledgor quotes across multiple pledge instructions drawn under a single loan agreement, letting the DP link related pledges to one underlying contract with a lender.
In plain language
A single loan agreement can produce more than one pledge instruction. A borrower might pledge shares in three separate batches against the same loan, on three different days.
Each of those batches is a separate transaction in the depository system, and each gets its own pledge sequence number automatically. But all three still belong to the same underlying loan.
The agreement number is how the borrower ties them together. It identifies the loan agreement itself, and the same agreement number can be quoted on every pledge instruction drawn under it.
How it works
A pledge transaction "needs an identification which may be an agreement number", as the workbook puts it — the pledgor submits it, along with details of the securities to be pledged, the closure date, and the pledgee's details, on the Pledge Request Form.
Where more than 1 pledge instruction is executed under a single agreement, the same agreement number should be quoted on all of them, so that the DP and the pledgee can see they relate to one underlying contract rather than treating each pledge as unrelated. Entering the agreement number is, however, optional in the CDSL system.
The agreement number also matters at closure and rejection. One of the listed reasons a pledgee's DP may reject an un-pledge or closure request is that the "agreement number differs from that on the agreement" — meaning what is quoted on the instruction does not match the underlying loan document the pledgee is actually holding.
A worked example
Mr Bose takes a loan against securities from a bank, under a single loan agreement numbered, say, LA-2024-0456. He pledges shares in three tranches over three weeks: 200 shares on 3 March, 150 shares on 10 March, and 100 shares on 17 March, each worth Rs 480 each, together totalling Rs 2,16,000.
Each pledge instruction generates its own pledge sequence number — three different numbers for three different transactions — but Mr Bose quotes the same agreement number, LA-2024-0456, on all three, so the bank and the DP can see they all arise from the same loan.
When Mr Bose later repays the loan and requests closure of all three pledges, if he mistakenly quotes a different agreement number on the closure request than the one on file with the bank, the pledgee's DP can reject it on exactly that ground — agreement number mismatch — even though the pledge sequence numbers are otherwise correct.
Why NISM asks about it
Chapter 9, section 9.2.2 (Creation of Pledge/Hypothecation by Pledgor), introduces the agreement number alongside the pledge sequence number, and section 9.2.4's list of rejection reasons for an un-pledge/closure request repeats it as a specific ground for rejection.
Expect a question distinguishing the agreement number (identifies the loan contract, optional to quote, repeatable across pledges) from the pledge sequence number (identifies one specific pledge transaction, always system-generated).
Common exam traps
- The agreement number is optional in CDSL, unlike the pledge sequence number, which the system always generates regardless of depository.
- One agreement number can appear on multiple pledge instructions; a pledge sequence number is unique to a single transaction and is never repeated.
- A mismatch between the agreement number on an instruction and the one on the underlying loan document is a specific, named ground for the pledgee to reject a closure request — this is not a hypothetical risk, it is on the workbook's own rejection-reason list.
Check yourself
1.A pledgor submits an unpledge request after repaying his loan, and the pledgee rejects it. What happens to the securities?
- a)They are automatically credited to the pledgor's free balance after seven days
- b)They continue to remain as pledged balances in the pledgor's account
- c)They are transferred to the pledgee's account
- d)The depository releases them on the pledgor's written representation
Show the answer
Answer: (b) They continue to remain as pledged balances in the pledgor's account
In case of rejection by the pledgee, the securities continue to remain as pledged balances in the pledgor's account.
This is the point of the whole confirmation architecture: the pledgor can request un-pledging or closure after the performance of the underlying agreement — request, not effect. Repaying the loan does not release anything by itself. There is no automatic timer, so option A is wrong.
Option C confuses closure with invocation. Securities move to the pledgee only on invocation, where they are transferred from the "pledged balance" of the pledgor's beneficial owner account to the "free balance" of the pledgee's beneficial owner account.
The pledgor is not left in the dark: the reasons for rejection are displayed in the DP system of the pledgor's DP, from a defined list including "agreement number differs from that on the agreement", "market value of pledged ISINs insufficient" and "POA not received from all holders". In CDSL those coded reasons are absent and the pledgee DP enters the reason in a remark field.
2.Mr. Rajiv Khanna has three separate pledge transactions with the same lender. How is each of them identified in the depository system?
- a)By the loan agreement number alone, which must be entered in both NSDL and CDSL
- b)By the pledgor's BO ID, since one pledgor can have only one pledge with a given pledgee
- c)By the ISIN of the securities pledged
- d)By a unique system-generated "pledge sequence number", with a separate set of instructions for each transaction; entering the agreement number is optional in CDSL
Show the answer
Answer: (d) By a unique system-generated "pledge sequence number", with a separate set of instructions for each transaction; entering the agreement number is optional in CDSL
The workbook: "There can be any number of pledge/hypothecation transactions between the same set of pledgees and pledgors. Each of these transactions has to be identified separately by a unique system generated number ('pledge sequence number') in the DP system and a separate set of instructions have to be given against each of these transactions." It adds: "(Entering the agreement number is optional in CDSL system)."
- A is wrong because the agreement number is optional in CDSL. Also, multiple pledge instructions can be executed on one agreement, so the agreement number cannot identify each transaction on its own.
- B is wrong: any number of transactions is allowed between the same parties.
- C is wrong: an ISIN identifies a security, not a pledge. Two pledges can cover the same ISIN.
The DP intimates the pledge sequence number to the pledgor once the request has been entered, verified and confirmed.
Where this is taught
Free preparation for NISM Series VIRelated terms
- PledgeA charge created over demat securities in favour of a lender who may appropriate them unilaterally on default — created by book entry under section 12 of the Depositories Act, not by handing over anything.
- Closure dateThe date entered on a Pledge Request Form indicating the intended duration of a pledge or hypothecation, after which the pledgee's DP must confirm creation of the pledge, except in NSDL where this rule does not apply.
- Pledge Request FormThe standardised form on which a pledgor initiates a pledge, carrying mandatory undertakings from both pledgor and pledgee to comply with the Indian Contract Act and give reasonable notice before invocation.
- Pledge sequence numberThe unique number the DP system generates for each pledge or hypothecation request, identifying that transaction for confirmation, closure and invocation even when many pledges exist between the same parties.