Sahare Wealth · SLBM
Lend or borrow shares, through the exchange
SLBM lets investors lend shares they hold and earn a fee, while others borrow them for short selling and settlement needs. It is not a loan and it carries its own risks. Here is how it works.
- Traded on the exchange
- Settled by NSE Clearing
- Help from Nagpur
Simple explanation
What is SLBM?
Think of it as renting out your shares for a fixed period. The borrower uses them and returns the same number of shares at the end.
Lender
You lend shares
You hold shares for the long term and offer them for lending. You earn a fee for the period.
Borrower
Someone borrows them
Traders borrow shares to deliver in a sale they made without holding the shares, such as short selling.
At the end
Shares come back
On the reverse-leg date, the borrower returns the shares, and the lender keeps the fee.
SLBM is not a loan against shares
If you need money, see Loan Against Securities. In SLBM, you earn a fee but don't receive a loan, and the shares you lend leave your account for the period.
Two sides
For lenders and for borrowers
If you want to lend
- Suits long-term holders of eligible shares who want extra income
- You earn a lending fee for the period
- Dividends on lent shares are passed on to you through the clearing corporation
- For bonus issues, mergers and similar actions, the contract is closed on the ex-date and the fee is returned in proportion
- The price risk stays with you: if the share falls, you still bear it
If you want to borrow
- Suits experienced traders who need shares for short selling or settlement
- You pay the lending fee and post margin on the first and reverse legs
- Collateral can be cash, approved securities, ETFs or mutual fund units, as allowed
- If you fail to return shares, a buy-in auction can follow
- Losses on a short position can be very large
How it works
The SLBM process
Everything runs on the exchange's SLB trading screen through your broker.
Place an order
Your broker enters a lend or borrow order on the exchange's SLB screen during the SLB session on trade day.
Match and first leg
Orders are matched. On T+1, the lender's shares move to the borrower and the lender is credited the lending price.
Hold period
The contract runs till the reverse-leg date, which falls on the first Thursday of the expiry month. Corporate actions are handled as per the scheme rules.
Reverse leg
The borrower returns the shares and the lender gets them back. Recall or repay requests can be made within the scheme's timelines.
Before you start
Risks to understand
Price risk stays with the lender
The shares you lend can still fall in value while they are with the borrower.
You can't sell lent shares
The shares are not in your account for the period, so you can't sell them in that time.
Corporate actions
For actions such as bonus or mergers, the contract is closed early. Read the rules to know the effect on you.
Low demand
If few people want to borrow, your order may not get matched at the fee you want.
Borrower's losses
Borrowers who short sell can lose much more than they put in if the price rises.
Tax
Lending fee income is taxable. Check the current treatment with your tax adviser.
Official sources
Check the details yourself
Questions
Frequently asked questions
What does SLBM stand for?
Securities Lending and Borrowing Mechanism, also called SLB or SLBM. It is a scheme run through the stock exchange and its clearing corporation.
Is SLBM a loan?
No. You don't get money against your shares. You lend the shares themselves and earn a fee.
For how long can shares be lent?
Up to 12 months, in monthly series. Contracts can be rolled over, but the total can't exceed 12 months from the original contract.
Which shares are eligible?
Selected liquid securities such as stocks in the F&O segment and certain ETFs. NSE Clearing publishes the eligible list every month.
Do I get dividends on shares I lend?
Dividends are passed on to the lender through the clearing corporation, as per the scheme rules.
Can any broker do SLBM for me?
No. The broker must be able to participate in the scheme. Ask us before you plan around it.