SLBM Lending Query

General
1

Hello @Zerodha-Staff

I have a query regarding SLBM as a lender. I went through the article, and this is what I understood:

  1. Minimum value of security needs to be ₹1L.
  2. I can lend only these securities. (Although the file seems older i.e. of Aug 2023)

Below are my questions:

  1. In what range I can expect the interest on the lending?
  2. What are the possible risks involved?
  3. Can I sell the stock in case I lent it to someone?
  4. What are the charges will I have to pay? To all the intermediaries including Zerodha, exchange and govt?
  5. Within how many days will I get my securities back?
2

  1. The lending and borrowing rates are determined by market partcipants through the demand and supply, much like the way stock prices are determined. To track the current lending/borrowing quotes, visit How to check live quotes and place orders for SLB?

  2. The settlement is guaranteed by ICCL. Hence, it’s a low risk product.

As a lender,

  • If you wish to exit the position before the contract expiry, you may not be able to exit until the shares are available in the market at your desired price.
  • Close-out risk (When the borrower defaults but gets the credit of shares through auction settlement, this close-out credit of shares is deemed as a sale transaction, and if the stock has made any gain from the time the lender had purchased, Short-term capital gain tax would apply to the gain.

As a borrower,

  • There can be a situation where the shares may not be settled due to the short delivery of shares, and clients have to wait for an additional day for the settlement to happen.

  • You need to make sure enough margins(~125% of borrowing value) are available in your account, failing to maintain margins would mean it can attract penalties.

  1. If you have lent, you will be lending it for a specified period of time, which comes with an expiry. So, if you want to exit before the contract expires, you will have to recall the shares at the current market price and then sell them. You may have to bear impact cost due to this.

  2. Explained here- What are the charges for SLB transactions?

  3. Once the contract is expired or if the shares are recalled, the shares are settled to demat by T+1 day.

Can check this for more.

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