What happens to stocks after pledging? Is it transferred to the broker or exchange to provide margins?

Once the shares are pledged, your holdings are sent to the exchange and the margin for the same is released by the exchange.FYERS merely credits the pledge margins into your trading account. 

Check out this article for the procedure to pledge your holdings in 10 minutes using OTP. 

Note: Interest of any kind will not be levied on such amounts by FYERS.

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