ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Securities lending involves the owner of shares or bonds transferring them temporarily to a borrower. In return, the borrower transfers other shares, bonds or cash to the lender as collateral and pays a borrowing fee. Securities lending can, therefore, be used to incrementally increase fund returns for investors.

Detailed explanation-2: -Stocks, real estate, and precious metals are all ownership investments. The buyer hopes that they will increase in value over time. Lending money is an investment. Bonds and even savings accounts are loans that earn interest over time for the investor.

Detailed explanation-3: -SLB or stock lending and borrowing is a system in which a trader can borrow shares that they do not already own or can lend the stocks that they own. An SLB transaction has a rate of interest and a fixed tenure.

Detailed explanation-4: -Securities lending can be a great source of alpha, and a way to earn from the hidden value of your portfolio. Earnings from lending is dependent on the level of availability of your stocks. The more widely available stocks, known as ‘general collateral’, generally produce lower returns, of up to 0.5% (50 bps).