The Reserve Bank of India today announced two policy initiatives to enhance participation in the Government Securities market.
These initiatives relating to Short Sale and When issued market in government secuirities would be contained in separate circulars to be issued by
the end of this month, RBI said in the Statement of Developmental and Regulatory policies issued alongside the latest review of the RBI policy for the
current fiscal on Wednesday
With regard to Short Sale, RBI said it propsed to liberalise the eligible short sle participants base as well as relax the entity wise and security category
wise limits for short selling in G-Secs. THe Rbi had in February 2006 introduced short sale in Central Government Securities to provide participants with
a tool to express two-way view on interest rates and thereby enhance price discovery. Currently, scheduled commercial banks, primary dealers and certain
well-managed Urban Cooperative Banks (UCBs) are permitted to undertake short sale transactions. There are entity-wise and (liquid or illiquid) security-wise
limits for undertaking short sale transactions. With an objective to deepen further the G-Sec and repo market, it is proposed to liberalise the eligible short sale
participants’ base as well as relax the entity-wise and security category-wise limits for short selling in G-Sec the Apex bank said
The ‘when issued’ (WI) market in the Central Government Securities (G-Secs) RBI proposedto liberalise the eligible participants’ base and relax the entity-wise
limits for taking positions in the when issued market. When isued market was introduced in May 2006, in light of the Fiscal Responsibility and Budget Management (FRBM) Act 2003, to strengthen the debt issuance framework via better management and distribution of auction risk.