Guide · Pledging
Your government bonds can back your F&O trades while still paying you interest. Here is exactly which ones qualify, what you get, what it costs, and the trap that catches people who assume all government bonds are the same.
Published 21 July 2026 · Approved list synced daily from Zerodha's own published list · Rules and charges as published on Zerodha's support pages
If you own government bonds and you also trade futures and options, you are probably leaving money on the table. The same capital can do both jobs at once.
Pledging lets you hand your bonds to your broker as security in exchange for trading margin. You keep owning them. They keep paying you interest. And you get roughly 90% of their value back as margin to trade with.
There is one catch, and it is the reason this page exists. Brokers do not accept every bond. They publish a list, and that list is decided bond by bond, not category by category. Plenty of things that sound like they should qualify simply do not.
Here is the whole picture.
You offer securities you already hold as collateral. Your broker marks a lien on them and the clearing corporation credits you margin to trade with.
Since the margin pledge system changed in August 2020, the bonds never leave your demat account. Only a lien is recorded, through the depository. You stay the owner throughout.
In plain terms: nothing is sold and nothing moves. A flag is put on your holding saying it is spoken for. Interest still reaches your bank account, gold bonds still track gold, and anything the bond pays out is still yours.
What you receive is called collateral margin. It is the market value of the bond minus a safety discount called a haircut. For approved securities at Zerodha it is interest-free.
The appeal is straightforward. A long-term bond holding is dead weight from a trading point of view. Pledge ₹10 lakh of government bonds and you fund roughly ₹9 lakh of F&O margin while still collecting the coupon. The same rupee works twice.
This is the part you should check before buying anything with pledging in mind. The table below is synced every day from Zerodha's own published list and filtered to government paper. If a bond is not here, it cannot be pledged at Zerodha today.
| Security | Haircut | Margin per ₹100 |
|---|---|---|
| Fetching the live list… | ||
Most people who pledge do it with shares. Doing it with government bonds is meaningfully better, and the reason is a rule almost nobody reads until it costs them.
Exchanges require that at least half the margin for overnight F&O positions comes from cash or something the exchange treats as cash. Pledged shares and equity mutual funds do not count as cash. Their margin can only ever cover half of what you need. The other half has to be real money sitting in the account.
If it is not there, you pay for the shortfall: 0.035% a day, which works out to about 12.775% a year, plus GST.
G-Secs, sovereign gold bonds, T-bills and liquid funds are all treated as cash-equivalent. Pledge those instead of shares and three things follow:
Put side by side: someone with ₹10 lakh of pledged shares still needs about ₹5 lakh sitting idle in cash to run overnight positions cleanly. Someone with ₹10 lakh of pledged G-Secs needs none, and is earning around 7% on the bonds the whole time.
That gap is the entire argument for holding government paper if you trade.
A haircut is the buffer your broker keeps in case the collateral falls in value. Your margin is the market value minus that percentage.
Government paper gets the gentlest haircuts available, usually 10%, with a few longer-dated bonds at 15%. Most shares sit between 20% and 50%.
Haircuts are not fixed. Brokers revise them when volatility or regulation shifts, and the change applies to your existing pledge the same day. The table above always carries the current number.
The whole thing happens inside Kite and takes a few minutes. Requests go through between 8:00 am and 5:00 pm on trading days, and the margin usually lands in about 15 minutes.
A pledge request cannot be cancelled once placed. If you change your mind, you unpledge afterwards, which is free but takes until the next trading day.
Margin against pledged mutual funds can take until the next trading day for some accounts. Exchange-listed securities like G-Secs and gold bonds follow the fast path.
| Item | Charge |
|---|---|
| Pledge request | ₹30 + GST per request, per bond flat, whatever the quantity |
| Unpledge request | Free |
| Interest on the margin | None approved securities are interest-free |
| Cash shortfall charge | Only if your cash portion falls short which government paper avoids by design |
Because the fee is charged per request per bond, pledge the full quantity you intend to in one go rather than adding to it across several days. Three separate requests on the same bond cost three times as much as one.
This is the most common pledging mistake among bond investors, and it is worth understanding before you place an order rather than after.
State development loans are the bonds individual states issue to fund their own spending. The RBI auctions them alongside central government bonds, they settle the same way, they are held in the same demat account, and they usually yield a little more. Buying one in the primary auction with the intention of pledging the allotment for margin is a perfectly natural thing to do.
The allotment goes through. The pledge does not.
The confusion is completely understandable. State development loans are government securities. RBI auctions them, they carry sovereign-adjacent credit, and "G-Secs can be pledged" is a true statement about the category.
As of this note, Zerodha's approved list contains zero state development loans. Every approved government security on it is central government paper, plus sovereign gold bonds and T-bills.
Being a government bond is not enough. Being that specific bond, on that broker's list, is what counts.
Three things to take from it:
Because we sync the list daily, every bond on the platform now shows its pledge status, including the date it joined the approved list. One glance before you place the order is enough to avoid this.
Pledging government bonds is about as safe as this kind of thing gets, but it is not free of edges.
Unpledging is the same flow in reverse: pick the pledged holding, choose a quantity, submit. It is free and there are no timing restrictions on placing the request.
The bonds are normally back in your demat, unencumbered, by the next trading day. Your available margin drops immediately though, not when the bonds return, so close or fund anything leaning on that margin before you send the request.
If you hold government bonds and trade F&O at all, the arithmetic is hard to argue with. A one-time ₹35 charge converts idle capital into cash-equivalent margin while the bond carries on paying you. There is no interest cost and no cash-shortfall penalty to dodge.
The honest caveat is that it makes over-leveraging easier, and the list can change under you.