What is SLBM in Stock Market? Earn upto 10% by Lending Stocks

Is Your Portfolio in Loss? Or Are You Holding for the Long Term? Now, Your Portfolio Can Earn for You Without Selling!

Yes, you heard it right! You can earn up to 10% or more by rental income by renting out your shares. This is possible through a mechanism called SLBM (Securities Lending and Borrowing Mechanism). So, ith is blog we are going to learn about what is SLBM or Security Lending and Borrowing Mechanism, and its working.

 

Let's understand this concept in detail.

What is SLBM?

Securities Lending and Borrowing Mechanism (SLBM) is a temporary arrangement where a lender lends their shares to a borrower for a certain period in exchange for a fee. 

 

Let's understand this with a simple example:

Imagine you want to do a part-time job, like working as a delivery driver, but you don't have a bike. So, you borrow a bike from your friend, make deliveries, earn money, and then return the bike to your friend along with a rental fee that you both agreed upon.

 This is the basic concept of SLBM! Here, there are three main participants:

1. Lender: The person who owns the shares in their demat account.

2. Borrower: The person who wants to use these shares temporarily.

3. Exchange: The platform that manages the whole transaction properly and according to the rules.

 

Detailed Video:

How Does SLBM Work?

The SLBM process works like this:

1. Registration: The lender and borrower register with the exchange, usually through their stock brokers.

2. Agreement: The borrower and lender agree on the loan terms, such as the duration, interest rate, and other conditions.

3. Collateral Deposit: The borrower deposits collateral with the exchange.

4. Transfer of Shares: The agreed number of shares are transferred from the lender's demat account to the borrower’s demat account.

5. Return of Shares: On the agreed date, the borrower returns the shares to the lender and pays the agreed fee.

6. Settlement: The exchange and broker take their share of the fee, and the remaining 

amount is credited to the lender’s account.

 

 

Can Any Shares Be Lent or Borrowed?

No, not all shares can be lent or borrowed. The NSE (National Stock Exchange) releases a list every month of shares that are available for lending. You can check this list on the NSE website.

 

How to Check which share can be lend?

Step -1- Go to Nse

Step -2- Hover on Market Data then click on the Securities Lending and Borrowing section.

Step -3 - Select the series and here you go.

 

Now the question arises, why does somebody lend or borrow the securities?

 

Why Do Lenders and Borrowers Participate in SLBM?

Lender’s Benefits:

1. Extra Income: You can earn extra income without selling your shares. Some shares can even give up to 10% yield.

2. Profit in Loss: If you have 100 shares of a company that are currently in loss, you can lend them and still make a profit!

Borrower’s Benefits:

1. Short Selling: Borrowers often use shares for short selling. For example, if a borrower sells 100 shares of Reliance at Rs. 2000 per share, and the price drops to Rs. 1800, they make a profit of Rs. 20,000 (100 shares x Rs. 200 profit per share).

2. Arbitrage: Borrowers also use SLBM for arbitrage. If a share price is different in two markets, they borrow shares to take advantage of the price difference.

Charges and Taxation:

For SLBM trades, there are no STT (Securities Transaction Tax), SEBI turnover charges, stamp duty, or transaction charges. The fee you earn from lending is taxable as "income from other sources" based on your income tax slab.

 

Final Summary:

Through SLBM, you can create an extra income stream by renting out your shares. To get started, talk to your stock broker’s relationship manager and ask about the available opportunities. So, whether your portfolio is in loss or you are holding shares for the long term, consider using SLBM to make your portfolio profitable!

Don't wait any longer, start using SLBM today and make your portfolio work for you!

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Disclaimer: 
This blog is intended for informational purposes only and should not be considered as financial advice or a direct suggestion to participate in the Securities Lending and Borrowing Mechanism (SLBM). Readers are encouraged to conduct their own research and consult with a qualified financial advisor before making any investment decisions. The information provided here is based on general market knowledge and may not be suitable for your specific financial situation. Always ensure you fully understand the risks and benefits associated with any financial strategy.