SECURITIES LENDING and STOCK LENDING

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abhishreshthaa

Abhijeet S
SECURITIES LENDING

  • Securities lending covers all sorts of securities including equities, government bonds and corporate debt obligations

  • Security Lending began as a means to cover short sales

  • In securities lending the lender effectively retains all the benefits of ownership, benefits such as dividends, interest, or stock splits.

  • Till date, four entities have been registered with SEBI as approved intermediaries: NSCCL, Stock Holding Corporation of India Ltd (SHCIL), Deutsche Bank and Reliance Capital.

STOCK LENDING

  • The borrower has to deposit collateral securities, which could be cash, bank guarantees, government securities or certificates of deposit or other securities, with an approved intermediary.

  • In case the borrower fails to return the securities, he is declared a defaulter.

  • The approved intermediary will liquidate the collateral deposited with it.

  • In the event of default, the approved intermediary is liable for making good the loss caused to the lender.



BENEFITS OF STOCK LENDING

  • It helps to increase the liquidity of the securities market by allowing securities to be borrowed temporarily; thus reducing the potential for failed settlements and the penalties that may incur.

  • It supports many trading and investment strategies that otherwise would be extremely difficult to execute

  • It allows investors to earn income by lending their securities on to third parties
 
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