What is Securities Lending and Borrowing (SLB), and how do you use it?

How can one take advantage of Securities Lending and Borrowing (SLB)?

And what exactly is it?

The Securities Lending and Borrowing (SLB) program gives you the opportunity to lend or borrow securities at any price and for a predetermined amount of time. You can quote loan costs and amounts, and your orders will be executed when the exchange’s quotes match. What are the benefits of borrowing securities?

1. You can either borrow money and sell the stock right away, or you can engage in short selling if you believe that the price of the stock will decrease over a significant amount of time.
2. You should take advantage of arbitrage opportunities when futures or options have incorrect pricing.
3. The aim is to meet the physical delivery requirements for futures and options trades.

Refer to the website, zrd.sh/physical-delivery-risk, for more information regarding physical delivery.

zrd.sh/physical-delivery-risk.What are the reasons for lending securities?

When investors lend their securities, they have the opportunity to create additional returns in addition to the return on their initial investment.

For both loaning and borrowing, there are eligibility requirements.

To place SLB orders at Zerodha, you must meet the minimal eligibility requirements listed below:

Lending Criteria:

The minimum order value per security that can be lent is ₹1 lakh, and any orders that fall below this threshold will not be executed.

Borrowing Criteria:

As a prerequisite for borrowing, an order consisting of at least 500 shares must be placed.

If your broker is Zerodha, please refer to the guide on how to activate Securities Lending and Borrowing (SLB).

Please refer to the article titled “How to activate and deactivate Securities Lending and Borrowing (SLB)?” on how to activate SLB.

Here is a PDF that explains the charges that are associated with SLB. (PDF)

Keep in mind the following:

1. There will be no business actions that the lender cannot participate in.
2. The Indian Clearing Corporation Limited (ICCL) is responsible for the clearing and settlement of trades, as well as providing guarantees for these processes.
3. (Approved list) The only securities that can be lent and borrowed are those that are eligible for the SLB program.  (Approved list)
4. SLB contracts, much like futures and options contracts, are set to expire on the first Tuesday of each consecutive month.
5. The date of the contract’s expiration is always the first Tuesday of the month, regardless of the series that it is traded on. The expiration date will be the following working day in the event that there are exchange holidays.
6. When the shares are moved from the demat account to the settlement account, a DP charge of ₹13 plus 18% GST will be applied.
7. A reduction in the DP costs to ₹12.75 plus 18% GST will be implemented in the event that the primary (initial) holder of the account is a female.
8. TThe lending and borrowing fee incurs a processing cost of 20% plus 18% GST, which applies to completed orders.

FAQ:

How much money can I make with SLB?

SLBM: What is it? Through the SLBM process, you can lend your demat account’s idle assets to a different investor, or borrower, who would then use them as security for their trade. You can make an extra 20% in fee money by lending.