Securities Lending and Borrowing (SLB) is a mechanism through which clients can lend or borrow securities at a specified price and time. Lenders and borrowers can quote a lending fee and quantity at which they want to lend or borrow, and the order will be executed if the quotes match at the exchange.

Why borrow securities?

• Borrow and sell the stock immediately or short sell if the view is that the price of stock will go down over a period of time.

• Take advantage of arbitrage opportunities when futures or options are mispriced.

• To fulfil physical delivery obligations for F&O trades. To know more about physical delivery, visit zrd.sh/physical-delivery-risk.

Why lend securities?

Investors can lend their securities to generate some additional return over and above their investment.

Eligibility criteria for lending and borrowing.

At Zerodha, the minimum eligibility criterion to place SLB orders is mentioned below:

Lending: The order value per security to lend is ₹1 lakh, below which orders will not be processed.

Borrowing: An order with a minimum of 500 shares must be placed.

To enable SLB, Demat Debit and Pledge Instruction (DDPI) must be provided. To learn more, see What is Demat Debit and Pledge Instruction (DDPI), and and how to activate it online and offline?

After the DDPI is enabled, visit console.zerodha.com/profile/slb to activate the segment. Activation will take up to 48 working hours.

Charges pertaining to SLB are explained here (PDF).

Did you know?

• The lender will be eligible for all corporate actions.
• The clearing and settlement of trades are handled and guaranteed by Indian Clearing Corporation Limited (ICCL).
• Only securities that are eligible for SLB can be lent and borrowed (Approved list).
• Just like futures and options contracts, SLB too, has contracts that expire on the first Thursday of every month.
• Contract expiry is on the first Thursday of every month for whichever series it is traded on. In case of exchange holidays, the expiry will be on the next working day.
• DP charges of ₹13.5 + GST will be applicable when the shares are moved from demat for settlement.
• A processing fee of 20% on lending and borrowing fee is applicable for completed orders.