NewsCorporate ActionsDhan Launches SLBM Facility Enabling Retail Investors to Earn Passive Income from Idle HoldingsDhan Launches SLBM Facility Enabling Retail Investors to Earn Passive Income from Idle Holdings
Dhan has introduced a Stock Lending and Borrowing Mechanism (SLBM) facility, allowing retail investors to lend their idle stocks and ETFs for passive income. Investors retain full ownership benefits, including dividends and corporate action eligibility. The platform offers potential annualized returns of 6% to 24% on highly liquid stocks. The lending process is integrated into Dhan's interface, involving stock selection, rental agreement configuration, and order confirmation. The facility operates under NSE regulations with clearing corporation oversight.
*this image is generated using AI for illustrative purposes only.
Dhan has launched its Stock Lending and Borrowing Mechanism (SLBM) facility, enabling retail investors to generate passive income by lending their idle investment holdings. This new offering allows investors to participate in an exchange-backed stock lending ecosystem while retaining full ownership benefits of their securities.
Key Features and Benefits
The SLBM facility allows retail investors to lend their shares and ETFs to other market participants, primarily traders and institutional investors, in exchange for rental income. Investors maintain complete ownership rights throughout the lending period, ensuring they continue to receive all associated benefits.
When investors lend their securities, they retain all essential ownership benefits throughout the lending period, including:
- Dividend income on lent securities
- Eligibility for corporate actions (e.g., bonus issues, stock splits)
- All economic benefits associated with their securities
- Unchanged ownership rights, despite physical transfer to the borrower's Demat account
Highly liquid stocks can offer attractive annualized rental returns ranging from 6% to 24%, with all transactions guaranteed by the clearing corporation.
Platform Integration and Process
Dhan has integrated SLBM directly within its platform interface through a dedicated section, streamlining the lending process for users. The lending process involves three simple steps:
- Select eligible stocks from holdings for SLBM participation
- Configure rental agreements including quantity, period, and rental cost
- Confirm orders with exchange-backed settlement guarantee
The platform includes a Stock Lending Calculator that helps investors estimate potential returns based on rental rates and duration before committing their holdings. Once the lending period concludes, borrowed shares automatically return to the investor's Demat account.
Regulatory Framework and Risk Considerations
The SLBM facility operates under NSE regulations with clearing corporation oversight ensuring default protection through auction mechanisms. However, investors should consider specific conditions before participating.
| Regulatory Aspects | Requirements |
|---|---|
| Eligible Securities | Only free and unpledged shares |
| Tax Treatment | Rental income taxed as business income |
| Early Recall | Permitted per NSE SLBM rules |
| Settlement | Exchange-backed guarantee system |
Rental income is subject to income tax treatment as business income, taxed according to the investor's applicable tax bracket.
Market Impact and Accessibility
This launch represents one of the earliest large-scale retail implementations of stock lending mechanisms in India. Previously, such facilities were primarily available to institutional investors, making Dhan's offering a significant step toward democratizing advanced market tools for retail participants.
The platform's approach focuses on making stock lending as accessible as traditional investing through a friction-free, transparent digital interface. This initiative strengthens Dhan's position as an innovation-focused platform providing enhanced investment solutions for retail investors seeking additional income streams from their existing portfolios.
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