Securities lending and borrowing (SLB) mechanism is very popular globally as it
provides liquidity in the equity market which in turn increases the market efficiency.
(SLB) is a temporary lending of securities executed by a lender to a borrower of
securities. It is a mechanism through which investors can borrow or lend shares
to other market participants. As per SEBI rules, stocks can be borrowed for a maximum
period of 12 months. Borrowers in SLB are usually short-sellers i.e. traders who
want to sell shares that they don't own.
The platform provides a viable alternative to derivatives market for purposes of
hedging Borrowers in SLB are usually short-sellers i.e. traders who want to sell
shares that they don’t own.
SLB is a less risky option for short-sellers compared to the more complex options
and futures contracts. In India, over 200 stocks are available on SLB platform for
borrowing and some of the stocks that are not part of derivatives or that see thin
volumes in futures market are available for borrowing on SLB.