Reserve bank of India allows banks to do short selling in the share market in India. Earlier banks were not allowed to do short selling in the secondary market. RBI issued a note dated 4 September 2013 about allowing banks to trade short selling. Full note is as under.
Please refer to our circular UBD.BPD.PCB.Cir.39/09.29.00/2002-03 dated March 13, 2003, in terms of which Urban Co-operative Banks were permitted to trade in Government Securities on the Stock Exchanges, but were not permitted to undertake short selling of Government securities, even on an intra-day basis.
2. It has been decided to permit well managed Urban Co-operative Banks, who are members of NDS-OM and have regular concurrent audit of their treasury operations, to undertake intra-day short selling of Government Securities. Accordingly, Urban Co-operative Banks, fulfilling the following conditions are required to seek permission from the Regional Offices concerned to undertake such transactions.
- NDS-OM Membership.
- Net Worth of ` 25 crore, CRAR of 9% or more and net NPA of not more than 3%.
- Sound risk management practices and mandatory concurrent audit of their Treasury Operations.
3. Urban Co-operative Banks are advised to adhere to the instructions/directions as prescribed by Internal Debt Management Department of Reserve Bank of India for intra-day short selling of Government Securities from time to time.
Tags-short selling in share market,what is short selling