A haircut is the portion of your stock's value that the broker keeps aside for safety when you pledge a stock. The remaining value is provided to you as pledge balance.
Example: If you pledge a stock worth ₹1000 with a 20% haircut:
- ₹200 is reserved as the haircut.
- You receive ₹800 as your pledge balance.
Your stock remains worth ₹1000, and you can sell it at that price anytime. The haircut only reduces the margin or funds available while ensuring safety for the broker.