The Securities and Exchange Board of India (SEBI) is looking to make the Securities Lending and Borrowing (SLB) mechanism simpler and more user-friendly as part of its efforts to boost activity in the cash market, said a senior official on Wednesday.
“We are trying to see if something needs to be done to further the use of the SLB mechanism in the market. To see if from a process and design perspective, we can make it easier and better for market participants to undertake SLB transactions,” said SEBI whole-time member, Ananth Narayan, on the sidelines of the Global Fintech Fest 2025.
The SLB framework, introduced by SEBI in 2007, allows investors holding shares to lend them for a fee, enabling activities such as short selling and helping improve market liquidity. However, despite the system being in place for nearly two decades, participation remains thin.
More liquidity
Market participants say the SLB segment has not gained traction because of procedural complexities, lack of awareness and limited eligible securities. Many traders continue to use the futures market for shorting as it offers more liquidity and convenience.
Globally, SLB markets are far more active, with institutional investors and mutual funds regularly lending securities to earn additional income.
Narayan said SEBI is reviewing the process and design of SLB transactions to make them easier for participants; discussions are still at an early stage, and any change will follow a consultative process.
A more user-friendly SLB framework could also help improve volumes and liquidity in the cash market, he added.