What It Means
Collateral Margin is margin funded not by cash in your account but by securities you've pledged to your broker, valued after a haircut is applied.
How It Works
Cash-equivalent collateral — pledged liquid mutual fund units, government T-bills — can fund your entire margin requirement. But non-cash collateral, like ordinary pledged shares, can only be used to meet up to 50% of your margin requirement; the other half must still come from actual cash or cash-equivalents in your account.
Warning
Pledging a large basket of shares doesn't mean it can cover 100% of a trade's margin on its own — SEBI's 50% cash-component rule means you'll still need real cash for at least half of it.