The Securities and Exchange Board of India (SEBI) is exploring measures to simplify and strengthen the Securities Lending and Borrowing (SLB) mechanism, with the goal of making it more user-friendly and widely adopted among market participants.
Speaking on the sidelines of the Global Fintech Fest 2025, Ananth Narayan, Whole-Time Member of SEBI, said that discussions on enhancing the SLB framework are currently at a preliminary stage.
“There’s a clear need to explore avenues that can promote greater adoption of SLB in Indian markets,” Narayan noted. “At present, traders tend to rely on the futures segment for short-selling due to its simplicity. We are examining how SLB processes can be streamlined to provide a more convenient alternative.”
Current Framework
The SLB mechanism enables investors to lend or borrow shares for a fixed period, offering benefits to both sides — borrowers use it for short-selling or settlement needs, while long-term investors can earn passive income from lending idle shares.
Currently, only dematerialised stocks listed in the futures and options (F&O) segment on the NSE and BSE qualify for participation. While SEBI has previously considered expanding the eligible securities universe, significant reforms are yet to take shape.
Globally, SLB transactions are often conducted over-the-counter (OTC) through bilateral agreements, allowing greater flexibility. In India, however, SLB transactions are exchange-based, with clearing corporations acting as central counterparties to ensure smooth settlement and mitigate default risk.
Summary
SEBI is reviewing ways to modernise and simplify India’s SLB mechanism, seeking to make it as efficient and accessible as the futures market. The regulator’s move aims to encourage wider participation, improve liquidity and transparency, and create a more balanced short-selling ecosystem in the Indian capital markets.
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