...Executes Six Stock Lending Deals

The Stock Holding Corporation of India Ltd (SHCL) has recently executed six stock lending deals worth around Rs 5 crore. The deals were executed for six of its individual clients.

SHCL is the first company in the country to conduct a stock lending deal. The other entities which have been approved to carry out stock lending deals in India are Deustsche bank, Reliance Capital and HDFC Bank.

Under a stock lending deal, an individual client borrows shares after giving a collateral in the form of securities or cash at a margin of 150 per cent of the value of securities being lent.

 

If the value of the securities being offered is Rs 100, the value of the collateral has to be Rs 150. The interest rate charged on such deals could vary between 12-20 per cent per annum, depending on the scrips under consideration. The rates are usually decided between the borrower and the lender, depending on the liquidity of the scrip and the size of the deal.

B V Goud, managing director, SHCIL, said, "This is just the beginning and we expect more such deals in the future. With volumes in the demat segment growing at an exponential rate, stock lending deals would also rise in number and volumes."

There is an in-built clause in the agreement between the parties which entitles the intermediaries offering the deal to confiscate and sell the securities if the margin charged by the intermediary, in this case SHCIL, falls below 110 per cent of the value of the securities.

This, the company officials point out, is a safety precaution which could be unlikely to be resorted to, given the small volumes as of now.