Pledge Agreement Template and How to Draft One (2026)

What is a pledge agreement, and when do you need one? A pledge agreement is a contract by which someone who owes a debt (the pledgor) gives goods or securities to the creditor (the pledgee) as security, with possession passing to the creditor until the debt is repaid. In India a pledge, also called a pawn, is a special kind of bailment governed by sections 172 to 181 of the Indian Contract Act, 1872. You need a pledge agreement whenever a loan or obligation is to be secured against movable property, from goods and gold to dematerialised shares, and you want the creditor's rights and the owner's right to get the property back to be clear and enforceable. The defining feature of a pledge is possession. Unlike a mortgage of land or a hypothecation of goods, a pledge usually requires the pledged asset to be delivered to the pledgee, or, for dematerialised shares, marked as pledged in the depository system. That transfer of possession is what gives the pledge its strength, and it is why the agreement must be clear about delivery. Below is a template you can copy and adapt, followed by guidance on how to fill each field. This is general information, not legal advice. For a share pledge or a large facility, have the final document reviewed. ## Pledge agreement template ```

PLEDGE AGREEMENT Date: [DATE] Between: [PLEDGOR], ("Pledgor") and [PLEDGEE / LENDER], ("Pledgee") 1. THE SECURED OBLIGATION The Pledgee has advanced / agrees to advance [AMOUNT] to the Pledgor ("the Debt"), repayable on [TERMS]. This pledge secures the Debt with interest and costs. 2. THE PLEDGED ASSETS The Pledgor pledges the following movable property ("the Pledged Assets"): [describe goods: quantity, description; or securities: number and class of shares, demat account, ISIN]. 3. DELIVERY OF POSSESSION The Pledgor delivers possession of the Pledged Assets to the Pledgee on signing / marks them as pledged in favour of the Pledgee in the depository system, to be held as security for the Debt. 4. PLEDGOR'S WARRANTIES The Pledgor is the sole owner of the Pledged Assets, they are free of any prior charge, and the Pledgor has the right to pledge them. 5. MARGIN AND TOP-UP (where relevant) [For share or commodity pledges: minimum cover ratio; the Pledgor to provide additional security if the value falls below the agreed level.] 6. RETENTION AND CARE The Pledgee may retain the Pledged Assets until the Debt is fully repaid and shall take reasonable care of them while in possession. 7. RIGHT TO SELL ON DEFAULT On default, the Pledgee may, after giving the Pledgor reasonable notice of the intended sale, sell the Pledged Assets and apply the proceeds to the Debt. Any surplus is returned to the Pledgor; any shortfall remains payable by the Pledgor. 8. REDEMPTION On full repayment of the Debt before sale, the Pledgor is entitled to the return of the Pledged Assets. 9. DIVIDENDS, VOTING AND ACCRETIONS (for securities) [State who receives dividends and exercises voting rights while the pledge subsists, and that bonus or rights shares are added to the Pledged Assets.] 10. COSTS, INSURANCE AND GOVERNING LAW [Who bears costs and insurance; governing law and forum.] Signed: Pledgor ____________ Pledgee ____________ Witnesses: ____________ ____________