SLB or stock lending and borrowing is a system in which a trader can borrow shares that they do not already own or can lend the stocks that they own.
An SLB transaction has a rate of interest and a fixed tenure.
Lenders can earn extra income by lending the stocks from their portfolio.
Borrowers can borrow the stocks for arbitrage, for short selling or to avoid the physical delivery.
Additional Income –
Generate additional income from the idle portfolio.
Multiple stocks –
securities on which derivatives are available in the F&O segment are available in SLB segment.
Enables short sell –
In case you have a bearish view on a stock, you can short sell the stock by borrowing the stock from SLB.
No counter party risk –
Securities lending and securities borrowing transactions are guarantee by NSCCL. NSCCL act as a financial guarantor for SLB product.
Avoid physical settlement –
No issues of physical settlement has you can borrow the stock from slb and avoid physical settlement.
Investors who have certain stock holdings in their Demat account and are not planning to sell that stock holding in near future can lend their shares through the SLB segment by charging certain fees and a fixed duration. The Lender can utilize their portfolio holding for additional income. After lending the security, the right is still entitled to any corporate action like dividend, bonus. The lender The borrowers are the traders who are taking advantage of them for a short term opportunity for possible gain for a stock's momentum. It allows them to meet obligations in case of shortage in delivery and avoid auction in the Cash segment. Lending and borrowing of shares does not mean a transfer of ownership rights of the shares, it simply means to let out the shares which are owned by the investor.