Archive · 12 Nov 2025
Sebi's Stock Lending Scheme Fails to Gain Traction Due to High Costs, Low Awareness
Imagine lending out your toys so someone else can play with them for a while, and they pay you a small fee.
That's kind of like India's stock lending scheme.
People who own stocks can lend them to others who want to 'borrow' them to do special trades.
But, many people don't use this system because it's too expensive and complicated.
To borrow a stock, you have to put up a lot of money as a guarantee, pay fees, and taxes.
Plus, most people don't even know this system exists!
The company in charge of the stock market, Sebi, wants to fix this.
They are planning to make it cheaper and easier for everyone to use, hoping it will make the stock market work better.
Experts suggest lowering the fees and taxes and also telling more people about it.
Some also think it would be good to let people borrow more types of stocks and maybe change the rules for how you can trade them.
India's Securities Lending and Borrowing Scheme (SLBS), launched in 2008, has not gained popularity due to high costs and low investor awareness.
The scheme allows investors to lend idle shares for a fee to those needing to short stocks or meet delivery obligations.
Borrowers face a 125% margin requirement, 1.5-2% monthly interest, and 18% GST on interest, making it expensive compared to futures trading.
Only 220 out of around 1,000 available stocks are actively traded on SLBS, highlighting limited participation.
Sebi plans a comprehensive revamp of the SLBS framework to increase participation, reduce costs, and enhance awareness among investors.
- Who
- Securities and Exchange Board of India (Sebi), market experts, retail investors, brokers, institutional investors
- What
- Revamping the Securities Lending and Borrowing Scheme (SLBS) to address its lack of popularity due to high costs, low awareness, and operational issues.
- When
- Launched in April 2008, with Sebi planning a revamp now; experts cite high costs and low awareness impacting participation.
- Where
- India
- Why
- The SLBS scheme has failed to gain significant traction for over seventeen years, leading Sebi to overhaul its framework to deepen the cash market and balance equity cash and derivatives volumes.
Challenges Hindering SLBS Adoption
Proposed Solutions for SLBS Enhancement
High Costs and Margins
Challenges Hindering SLBS Adoption
Borrowers face exorbitant costs, including a 125% margin requirement (half in cash, half in cash equivalent) and a 1.5-2% monthly interest on borrowed stocks. Additionally, an 18% GST on interest is often non-creditable for proprietary traders.
Proposed Solutions for SLBS Enhancement
Experts suggest reducing the lender margin requirement to 110-115% and lowering GST on lending fees from 18% to 5% for proprietary trading firms. Rationalizing costs is seen as crucial for market participant attractiveness.
Lack of Retail Investor Awareness
Challenges Hindering SLBS Adoption
Retail investors are largely unaware of the Securities Lending and Borrowing Scheme (SLBS) and its benefits, contributing to its tepid activity despite being available for over seventeen years.
Proposed Solutions for SLBS Enhancement
Brokers are launching integrated digital platforms to simplify stock lending/borrowing for retail investors. Awareness campaigns and making the process as seamless as buying/selling stocks are proposed.
Operational and Structural Issues
Challenges Hindering SLBS Adoption
The current framework limits intraday squaring off in cases of market inversion, and the availability of stocks for SLBS is restricted, particularly for those without derivative availability.
Proposed Solutions for SLBS Enhancement
Expanding the universe of SLBS scrips to include stocks without futures and options, and exploring options-only markets for certain stocks (similar to the US model) are suggested to improve hedging and market participation.
- SLBS Launch Date
- April 2008
- Current Number of Stocks Available on SLBS
- Around 1,000
- Number of Active Stocks on SLBS (as of Monday)
- 220
- Minimum Borrowing Period
- One month
- Maximum Borrowing Period
- One year
- Borrower Margin Requirement
- 125% of current market value
- Interest Rate for Borrowers
- 1.5-2% per month
- GST on Interest
- 18%