Home Acts & Rules Direct Taxes Schemes Securities Lending Scheme, 1997 This
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Para 4 - Scheme - Securities Lending Scheme, 1997Extract Scheme. 4. (1) The lender shall enter into an agreement with the approved intermediary for depositing the securities for the purpose of lending through an approved intermediary as per the scheme and the borrower shall enter into an agreement with the approved intermediary for the purpose of borrowing of securities and as such there shall be no direct agreement between the lender and the borrower for the lending or borrowing of securities. (2) The agreement between the lender and the approved intermediary shall provide that when the lender has deposited the securities with the approved intermediary under the scheme, the beneficial interest shall continue to remain with the lender and all the corporate benefits shall accrue to the lender. (3) The lender shall be entitled to deposit only those securities registered in his name or in the name of any other person duly authorised on his behalf with the "approved intermediary" for the purpose of lending. (4) The lending of securities under the scheme through an approved intermediary and the return of the equivalent securities of the same type and class by the borrower shall not be treated as disposal of the securities. (5) The approved intermediary shall issue a receipt to the lender acknowledging the deposit of the securities by the lender. (6) The approved intermediary shall, unless otherwise provided in the agreement with the lender, guarantee the return of the equivalent securities of the same type and class to the lender along with the corporate benefits accrued on them during the tenure of the borrowing. Even in case of failure of the borrower to return the securities or corporate benefits the approved intermediary shall be liable for making good the loss caused to the lender. (7) The approved intermediary may retain the securities deposited by the lender in its custody as a trustee on behalf of the lender. (8) The approved intermediary shall in accordance with the terms of the agreement entered into with the lender, be entitled to lend the securities deposited by the lender to the borrower from time to time. (9) Under the scheme, the title of the securities lent to the borrower shall vest with the borrower and the borrower shall be entitled to deal with or dispose of the securities borrowed in any manner whatsoever. (10) The agreement between the borrower and the approved intermediary shall, inter alia, provide that the borrower shall have an obligation to return, the equivalent number of securities of the same type and class forward, to the approved intermediary within the time specified in the agreement along with all the corporate benefits which have accrued thereon during the period of borrowing. (11) The agreement between the lender and the approved intermediary and the borrower and the approved intermediary shall also provide for the following terms and conditions :— (a) the period of depositing/lending of securities, (b) charges or fees for depositing/lending and borrowing, (c) collateral securities for borrowing, (d) provisions for the return including premature return of the securities deposited or lent ; and (e) mechanism for resolution of the disputes through arbitration. (12) The borrower shall not be entitled to discharge his liabilities of returning the equivalent securities through payment in cash or kind. (13) The approved intermediary shall be entitled to receive from the borrower collateral security and fees for lending the securities. (14) The borrower shall deposit the collateral securities with the approved intermediary in the form of cash, bank guarantee, Government securities or certificate of deposits or other securities as may be agreed upon with the approved intermediary for the purpose of ensuring the return of the securities. (15) When the approved intermediary returns the securities to the lender, the approved intermediary shall issue a receipt to the lender. (16) The approved intermediary shall maintain a complete record of the securities deposited by the lender, securities lent to the borrower, the securities received from the borrower and the securities returned to the lender by the approved intermediary. (17) In the event of the failure of the borrower to return the securities in terms of the agreement, the borrower shall become a defaulter and the approved intermediary shall have the right to liquidate the collateral deposited with it, in order to purchase from the market the equivalent securities of the same class and type for the purpose of returning the equivalent securities to the lender. The approved intermediary shall be entitled to take any action as deemed appropriate against the defaulting borrower to make good its loss, if any. (18) The approved intermediary shall notify defaults by any borrower to the Board, the concerned stock exchange and the concerned authorities for initiation of appropriate action against the defaulter.
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