How You Earn by Renting Stocks (SLB Income Explained)

Investors think the only way to make money from stocks is by buying low and selling high with making a loss. But instead of selling stocks, what if you could make money by renting them? Indeed, that is feasible. Passive income from the stock market can be obtained through a system known as Securities Lending and Borrowing (SLB).

In this blog, we will explain the SLB strategy step by step, how to rent your stocks for income, the risks involved, and is stock lending income is the right strategy for you.

What Does Renting Your Stocks Mean?

Renting your stocks does not mean transferring ownership differently.

When you rent out stocks:

• You remain the owner

• The shares are borrowed temporarily

• You receive a fixed income from lending

• The shares get automatically returned to you after the lending period.

This is the reason that SLB is gaining popularity for earning passively from the stock market.

 

Earn by Renting Stocks (SLB Income Explained): Video Breakdown

 

What is Securities Lending and Borrowing (SLB)?

(SLB Securities Lending and Borrowing is a SEBI regulated framework in which:

• Long term investors lend their shares.

• Short term traders or institutions borrow these shares.

• The lender receives stock lending income.

• The NSE Clearing Corporation is the guarantor.

• In essence, this system allows you to make money off stocks you rent.

What is the Rationale Behind Borrowing Stocks?

Explaining the need of the borrower gives the SLB income justification.

Some reasons for borrowing stocks include:

• Short selling

• Arbitrage

• Hedging

• Market-making activities.

There is a sense of urgency for obtaining the borrowed shares, and this is the reason for them to be willing to offer a rental fee that is income to the stock lender.

 

 

How You Earn by Renting Stocks (SLB Income Explained)

To understand the concept of rent your stocks income, let us use a simple case example. Example:

Say you have 1,000 shares of Infosys.

Say each share is worth ₹1,400. That means you have total holdings worth ₹14,00,000. If the SLB annualised lending rate is 12%. You would earn roughly ₹14,000 a month. Which is about ₹1,68,000 a year. In this you did not sell your shares. You also did not lose ownership. Rather, you made stock market passive income. That is the main reason long term investors are looking at stock lending income.

SLB Strategy Walkthrough: Processes In Order

To clarify, here is the SLB strategy explained in simple steps.

Step 1: Retain Qualifying Stocks

Only stocks that the NSE approves for the SLB are lent. Most liquid and large-cap stocks are qualified.

Step 2: Activate SLB Facility

Brokerages such as Zerodha, Angel One, Upstox, ICICI Direct, etc., are SLB accessible.

Step 3: Select Lending Term

You can lend shares for:

• 1 month

• 3 months

• Or some contract term.

Step 4: Determine Lending Rate

The lending fee is based on:

• The level of demand for the stock.

• The interest in short selling.

• Market instability.

Step 5: Your Shares Are Lent

Your shares are moved temporarily to the SLB pool, and the borrower has to submit collateral.

Step 6: Rental Income in Your Trading Account

Your stock rent income is deposited in your trading account.

Step 7: Automatic Syncing of Shares

After the contracts expire, the shares will be automatically sent back to your Demat account.

Is It Really Passive Income SLB?

Absolutely. SLB is a passive income stock market because:

- Trading is not done on a regular basis

- Price prediction is not required

- The income is guaranteed

- Your ownership will be the same

But, it’s semi-passive because monitoring contracts and availability is needed.

What Income Generating Stocks Are There

Not all stocks result in passive income stock lending.

Some stocks often result in high lending income:

- Those are the stocks whose short selling interest is high.

- Stocks that are in a high volume of news.

- Smaller stocks, especially the mid caps (They are riskier).

- Stocks that are approaching the expiry of derivatives.

With large-cap stocks, you will receive a constant income that will be low-mean while a constant income will be generated with volatile stocks.

Returns: How Much Can You Earn by Renting Stocks?

Annualised SLB returns are approximately:

Stock Category	Annualized SLB Yield
Large-cap	4% – 10%
Mid-cap	8% – 20%
High-demand stocks	20% – 30%+

Earnings are fluctuating every day.

This makes SLB one of the most underrated stock market passive income strategies.

What are the SLB Risks?

Every income strategy involves risk and SLB is no exception.

1. Market Price Risk

If stock price drops during the lending period, your portfolio value decreases. (Even though your shares get returned.)

2. Liquidity Risk

Some stocks can be more difficult to borrow.

3. Corporate Action Effects

While your stocks are lent-

- Dividend payouts are altered.

- Bonus payouts/spins may cause delays in settlements.

4. Opportunity Cost

Shares must be kept lent for the duration of the lending period. The counterparty default risk is very small because NSE Clearing Corporation guarantees all settlements.

Is SLB Safe in India?

Yes, SLB is:

• SEBI regulated

• Monitored by the Exchange

• Backed by Collateral

• Guaranteed by the Clearing Corporation

• This makes earning by renting stocks one of the safest non-trading income strategies in equities.

Income Taxed from Lending Stocks

• Income from SLB is taxed as "income from other sources."

• Added to your overall earnings

• Taxed according to your slab

• Brokerage plus additional fees are deductible

• Tax reporting is best done with the assistance of a tax expert.
  
  

Who is best suited to use the SLB strategy?

SLB is best suited for:

• Passive income seekers.

• Investors with a long-term approach.

• Investors with a diversified and static portfolio.

• Investors seeking stock market passive income.

SLB is not suited for:

• Investors looking for a short-term outlook.

• Investors needing immediate cash.

• People reluctant to experiencing a temporary lock-in of their assets.
  
  

Which is better: SLB or Dividend Income?

Feature	SLB Income	Dividend Income
Frequency	Regular	Irregular
Control	High	Low
Returns	5%–30%	1%–4%
Dependence	Market demand	Company profits

Utilised properly, SLB can radically enhance the total returns of a portfolio.

Renting Stocks: Common Misconceptions

"Ownership is lost" –  False

"Derivatives are risky" –  False

"Only large investors can do it" –  False

SLB is accessible to retail investors with the right level of education.

Is SLB Worth It?

If you do hold stocks but are not actively trading them, renting your stock income can be a powerful way to earn extra returns. The SLB strategy explained in this guide shows that stock lending is:

- Transparent

- Regulated

- Profitable

- Underutilised

While SLB should not supplant long-term investing, it can extend your portfolio income without selling your assets.

 

 

Key Takeaway

If properly implemented, earning by renting stocks through SLB can transform inactive assets into a consistent stock lending income, making it one of the most effective strategies in India for passive income from the stock market.

 

DISCLAIMER: This blog is NOT any buy or sell recommendation. No investment or trading advice is given. The content is purely for educational and information purposes only. Always consult your eligible financial advisor for investment-related decisions.