What is Badla financing

As the term itself signifies, 'Badla' means 'something in return'. Badla is the charge, which the investor pays for carrying forward his position. This hedge tool lets the investor take a position in scrip without actually taking delivery of the stock, thus carrying forward his position on the payment of small margin. The Badla system of transactions has been in practice for several decades in the Stock Exchange, Mumbai and serves 3 needs of any stock exchange: A) Quasi-hedging: If an investor feels that the price of a particular share is expected to go up or down, without giving or taking the delivery he can participate in the possible volatility of the share.B) Stock lending: If a stock lender wishes to short sell without owning the underlying security, he employs the Badla system and lends his stock for a charge. C) Financing mechanism: If he wishes to buy the share without paying the full consideration, the financier steps into the CF system and provides the finance to fund the purchase the scheme is known as "Vyaj Badla" or "Badla" financing.