Securities Lending & Borrowing (SLB) Market in India — Overview, Trends
& Opportunity Analysis (NSE & BSE)
1 Overview
1️⃣
Securities Lending and Borrowing (SLB) is a regulated mechanism in India through which
investors can lend their securities to other market participants for a fee, for a defined
period. It is an essential element of modern capital markets that enhances liquidity, enables
short selling, supports arbitrage opportunities, and allows long-term investors to earn
passive income on their idle holdings.
The SLB system in India was introduced by SEBI and is facilitated primarily by two
recognized exchanges — the National Stock Exchange (NSE) and the Bombay Stock
Exchange (BSE). The clearing corporations, namely NSE Clearing Limited (NCL) and Indian
Clearing Corporation Limited (ICCL), act as central counterparties to guarantee settlement
and minimize counterparty risk.
Over the past few years, SLB activity in India has grown steadily, especially as mutual funds,
insurers, and HNIs have started to participate. However, the market remains relatively
small compared to developed economies, leaving significant scope for expansion.
2️⃣Operational Framework
• Eligible Securities: Primarily F&O-listed and liquid stocks approved by the exchanges.
• Trade Matching: Orders are matched on a price-time priority basis on the SLB platform.
• Tenure: Standard monthly contracts; securities must be returned by the expiry date.
• Settlement: Handled by clearing corporations with margin and mark-to-market
mechanisms.
• Corporate Actions: Adjusted so that lenders retain economic benefits such as dividends
and bonuses.
3️⃣Key Market Participants
• Lenders: Institutional investors (mutual funds, insurance companies, and custodians) as
well as HNIs and retail investors.
• Borrowers: Primarily traders, arbitrageurs, hedge funds, and proprietary desks who need
temporary access to securities.
• Clearing Corporations: NSE Clearing Ltd (NCL) and ICCL (BSE) act as central
counterparties, ensuring guaranteed settlement.
• Depositories: NSDL and CDSL manage the electronic transfer and return of securities.
• Brokers & Custodians: Facilitate transactions and ensure compliance and reporting.
4️⃣Market Data — Daily & Monthly Turnover
As per NSE data, the SLB segment has witnessed increasing participation. NSE accounts for
more than 95% of the market’s total turnover, while BSE’s activity remains minimal. Daily
average turnover typically fluctuates between ₹150–300 crore, depending on market
sentiment and short-selling activity. Monthly total transactions often exceed ₹5,000–7,000
crore during active trading months.
The NSE publishes daily and monthly SLB turnover reports on its website under Market
Data → Securities Lending and Borrowing (SLB). These reports provide details such as total
transaction value, number of contracts, and top traded securities. BSE also publishes data
via ICCL, though turnover is comparatively smaller.
Data sources for analysis:
- NSE: SLB Historical Reports (Daily and Monthly CSVs)
- BSE/ICCL: SLB segment reports (if active)
- SEBI Monthly Bulletins: Market-wide SLB statistics and trends
5️⃣Income Potential for a New Entrant
A new entrant (such as a broker, custodian, or institutional participant) can generate
income through lending fees, service charges, and spread income. Returns depend on
utilization of lendable assets and prevailing lending rates. The potential earnings scale with
market depth, asset base, and participation rates.
For example, assume a participant manages ₹500 crore of lendable securities. The income
potential under various utilization and fee scenarios is as follows:
Scenario Utilisation Avg Lending Take Rate Annual Net
Fee (p.a.) Revenue
Conservative 10% 2% 30% ₹0.30 crore
Moderate 30% 4% 30% ₹1.80 crore
Aggressive 60% 8% 40% ₹9.60 crore
Typically, lending fees vary from less than 1% for highly liquid stocks to more than 10% for
scarce or high-demand securities. A well-capitalized participant with a strong client base
can earn steady ancillary income while providing valuable liquidity to the market.
6️⃣Costs & Risks
• Operational – IT integration, compliance, and manpower costs.
• Regulatory – Registration and adherence to clearing corporation norms.
• Capital – Margin and collateral requirements for borrowing positions.
• Market – Low utilization during volatile or sideways market conditions.
7️⃣Data Tracking & Analysis — Excel Template
An Excel workbook is provided to consolidate and analyze monthly SLB turnover from NSE
and BSE. It automatically computes total annual turnover, average monthly and daily values.
File name: SLB_NSE_BSE_12month_template.xlsx
Usage steps:
1. Download monthly CSV files from NSE (and BSE if available).
2. Sum the 'Transaction Value (₹)' for each month.
3. Paste monthly totals into the 'MonthlyData' sheet.
4. Review summary outputs and trend charts automatically generated.
8️⃣Strategic Insights
• NSE dominates SLB volume, offering the most liquid market for participants.
• The segment remains under-penetrated compared to global standards, suggesting growth
potential.
• Rising institutional and passive fund participation will likely expand the lendable
securities pool.
• New entrants with strong custody networks and risk management can build profitable
SLB businesses with low default risk.
9️⃣References
• NSE India – Market Data → SLB: [Link]
• NSE Clearing Ltd (NCL): SLB product manual and reports
• BSE / ICCL – SLB section under Market Data
• SEBI Monthly Bulletins – Short Selling and SLB updates
• NSDL / CDSL – Corporate action adjustment procedures
