How to lend and borrow stocks on kite?
If I lend my stocks say for 12 months, will I get back my stocks at the current market price(that is after 12 months price) or will I get the stocks at the original lent price?
Can I I get back my stocks in between the lending period? That is if i lend my stocks for 12 months and if I change my mind for whatsoever reason after 6 months can I get back my stocks?
This post on Z-connect addresses a lot of the queries around the concept of SLB in India.
According to this support page, Zerodha only supports SLB via offline route. Currently, you will have to raise a ticket via that support page to lend/borrow stocks on Zerodha.
As you are lending your shares, you would be getting them back at the prevailing market price at the time of return. The main aim of lending (for a lender) is to earn an additional return on an idle portfolio in the form of lending fees. An NSE document (Page 10) demonstrates an example P/L for both the borrower and lender taking part in an SLB transaction.
The post referenced earlier addresses this specific query -
Also an interesting thing is that in case the borrower wants an early repayment or lender wants an early recall there is a mechanism to do so. The borrower would place an early repay request with the fees they are willing to receive and the lender would place an early recall request with the fees they are willing to pay.
In case you are interested, the charges for using the SLB facility are explained in a different thread - Explain SLB charges please
In the above article by zerodha
A borrower is asked 125 % margin of stock value, why would he block 125 percent of margin when he simply can buy same stock for 100 percent margin. @zerodha @ShubhS9 @prayag
Understood , why 125% for all stocks? How is that 25 percentage arrived at?
It can be any number, 20, 30 etc, there is no particular reason for 25% as I know but that is collected as some buffer margin.
Say, A borrower does arbitrage for 3 months future and the lender recalls for whats so ever reason.
How much time is given to borrower to return the stocks if he does not agree for any fee by the lender?
isn’t the borrower is at risk?
Reason:
The arbitrage opportunity is better of closing on expiry day.
Does zerodha offer online SLB, now?
if any video demonstrating the actual SLB steps, Please share.
Also,
“https://zerodha.com/z-connect/queries/stock-and-fo-queries/basics-on-slb-stock-lending-borrowing”
The below paragraph is from Z-connect ,I could not understand “close out risk”.
How can one default and get credit when you have 125% margin?
The only risk a lender has would be the close out risk (When the borrower defaults but gets the credit of shares from AI(NSCCL) using the 125% of borrower margin blocked by having an auction to purchase those shares). 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 on the gain.
