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Mumbai, Jan. 1 The Reserve Bank of India has permitted foreign institutional investors and sub-accounts registered with Securities and Exchange Board of India (SEBI) to short sell, lend and borrow equity shares of Indian companies. This will, however, be subject to the current FDI policy, said a notification from the RBI.

The RBI notification follows the SEBI’s permission for short selling of shares by all classes of investors.

Short selling refers to the selling of a security that the seller does not own, or any sale that is completed by the delivery of a security borrowed by the seller.

The central bank has, however, banned short selling of equity shares which are in the ban list or caution list by FIIs. “Borrowing of equity shares by FIIs should only be for the purpose of delivery into short sale,” said the notification.

SEBI, which had earlier banned short selling in the wake of Ketan Parekh scam in 2001, allowed short selling of shares by all classes of investors, both institutional and retail, on December 20, 2007.

The notification from the RBI also mentioned that the margin or collateral should be maintained only in the form of cash by FIIs.

More Stories on : Foreign Institutional Investors | RBI & Other Central Banks

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