RBI to extend short sale period of G-sec to 3-months

The Reserve Bank of India on Tuesday said that it has proposed to extend the period of short sale in the Central Government securities from the present five days to the maximum of three-months.

The move will provide a fillip to the interest rate futures market and the term repo market, the Reserve Bank said in its monetary policy statement for FY 12.

Intra-day short selling in Central G-sec was permitted in February 2006 based on the recommendations of the Technical Group on the Central Government Securities Market.

In January 2007, based on the feedback received, the period of short sale was extended to five days. The apex bank now proposed to extend the period of short sale to a maximum period of three months.

The RBI also said that FIIs would now be allowed to cancel and rebook up to 10% of the market value of the porfolio as at the beginning of the financial year.

Presently, FIIs are permitted to cancel and rebook two per cent of the market value of the portfolio as at the beginning of the financial year.

The move is in response to the large positions held by the FIIs and considering the increased depth of the Indian forex market to absorb the impact on the exchange rate, the RBI said.

Detailed guidelines on this would be issued separately, the policy statement said. .