The Works

As such, there will be no direct agreement between the lender and the borrower of securities. According to Sebi guidelines, an approved intermediary, which has a minimum net worth of Rs 50 crore, is to act as a liaison between the borrower and lender. The intermediary is allowed to take exposure up to 10 times its net worth. For a clearing corporation or clearing house, the net worth criteria would be decided by the stock exchange. The intermediaries would guarantee the return of equivalent securities along with the benefits accrued on them during the tenure of borrowing. In case of failure of borrower to return the securities or benefits, the intermediary is liable to make good the loss caused to the lender. This makes it clear that intermediary is to act as principal.

 

Till now, Sebi has granted approval to Stock Holding Corporation of India (SHCIL) and Reliance Capital to act as approved intermediaries. Among the other players who are applying to Sebi include National Securities Clearing Corporation, a subsidiary of NSE, and Deutsche Bank, the largest custodian for FIIs.

Approved intermediaries could lend their clients