You continue to be eligible for corporate action benefits such as dividends, bonuses and rights issues even while your stocks are pledged. Pledged shares are only lien-marked; they are not moved out of your demat account.
The one exception
You lose dividend benefits only if your pledged securities are confiscated because of a loan default, that is when:
- LTV remains above 50% for 6 consecutive days
- Interest is in default for 3 consecutive months
- LTV exceeds 60% even for a single day
- The loan tenure has ended and the outstanding loan is not repaid by the due date
If your securities are confiscated and are lying in the Zerodha Capital demat account on the record date of a dividend declaration, the dividend will not be credited to you. Taxation regulations require the dividend to be paid to the legal owner of the securities on that date.
Even in that situation you remain eligible for all other corporate actions, apart from dividends.