📄 Source: Reserve Bank of India · RBI/2007-2008/220
Quick answerRBI now permits covering short positions in central government securities outside the NDS-OM platform, including via telephone market or primary issuance. The sale leg must still be on NDS-OM. This enhances flexibility for banks and primary dealers.
What changed
Previously, both the sale and cover legs of short-sale transactions in government securities had to be executed on the NDS-OM platform. Now, only the sale leg must be on NDS-OM; the cover leg can be done outside NDS-OM, such as through telephone deals or primary market purchases.
What it means for you
Banks and primary dealers gain more flexibility to manage short positions, potentially reducing transaction costs and improving liquidity in the G-sec market. However, they must strengthen internal controls to ensure short-sale limits are not breached, as cover operations can now occur across multiple venues.
What you must do
Update internal policies to reflect that cover leg of short sales can be executed outside NDS-OM, including telephone market or primary issuance.
Enhance monitoring systems to track short-sale limits across both NDS-OM and non-NDS-OM cover transactions.
Train treasury and dealing teams on the revised guidelines to ensure compliance with sale leg restrictions.
Review and document internal controls to prevent limit breaches given the expanded execution venues.
Who it affects
All Scheduled Commercial Banks (except RRBs), Primary Dealers
Regulatory timeline
Decoded by BankPulse2026-06-19 14:41 IST
Superseded by — Short Sale (Reserve Bank) Directions, 2018
Status change: superseded12 Jul 2026, 04:00 IST
Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).
Can we now execute the entire short-sale transaction outside NDS-OM?
No. Only the cover leg (buying back to close the short position) can be done outside NDS-OM. The initial sale leg must still be executed on the NDS-OM platform.
What are the permissible venues for the cover leg?
The cover leg can be done on NDS-OM, outside NDS-OM (e.g., telephone market), or through purchases in primary issuance of government securities.
Do the earlier short-sale limits and time periods still apply?
Yes. All other terms and conditions from previous circulars, including the five-trading-day limit for short positions, remain unchanged.
📜 Read the original circular — full text as issued by RBI
This circular has been superseded by Short Sale (Reserve Bank) Directions, 2018 dated July 25, 2018 .
RBI/2007-2008/220
IDMD.DOD.No.3165 /11.01.01(B)/ 2007-08
January 01, 2008
All Scheduled Commercial Banks (except RRBs)
& Primary Dealers
Dear Sirs,
Secondary Market Transactions in Government Securities - Short-selling
With a view to enhancing liquidity in the G-sec market and providing the market participants with a tool to express two-way view on interest rates, intra-day short sale in the Central Government dated securities was permitted vide our circular IDMD.No. 03/11.01.01 (B)/2005-06 dated February 28, 2006 . Subsequently, the period allowed for shorting was extended to five trading days vide our circular IDMD.No/11.01.01(B) / 2006-07 dated January 31, 2007 .
2. It was specified in the aforementioned guidelines that "the sale leg as well as the cover leg of the transaction should be executed only on the Negotiated Dealing System – Order Matching (NDS-OM) platform." In terms of the announcement made vide paragraphs 126 and 127 of the Mid-Term Review of Annual Policy Statement 2007-08, it has now been decided to permit undertaking of the cover leg of short-sale transactions even outside the NDS-OM platform. In other words, the transactions to cover short positions in government securities may be undertaken either on or outside the NDS-OM platform, i.e., the telephone market or through purchases in primary issuance. The sale leg of short sale transactions shall, however, continue to be undertaken on the NDS-OM platform only .
3. Banks and Primary Dealers may put in place proper internal controls and systems to ensure that the stipulated short sale limits are adhered to, taking into account the cover operations done both on and outside NDS-OM.
4. All other terms and conditions specified in above circulars remain unchanged.
Yours faithfully,
(K. V. Rajan)
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2007-2008/220 · issued 01 Jan 2008. The plain-English explanation above is BankPulse’s own independent summary.
Test yourself
Quick self-check built only from the facts already on this page — tap a question to reveal the answer.
Q1. In one line, what does this circular do?
RBI now permits covering short positions in central government securities outside the NDS-OM platform, including via telephone market or primary issuance. The sale leg must still be on NDS-OM. This enhances flexibility for banks and primary dealers.
Q2. Who does this circular apply to?
All Scheduled Commercial Banks (except RRBs), Primary Dealers
Q3. What is the first thing you should do about it?
Update internal policies to reflect that cover leg of short sales can be executed outside NDS-OM, including telephone market or primary issuance.
Enhance monitoring systems to track short-sale limits across both NDS-OM and non-NDS-OM cover transactions.
📜 Compliance
Update internal policies to reflect that cover leg of short sales can be executed outside NDS-OM, including telephone market or primary issuance.
Train treasury and dealing teams on the revised guidelines to ensure compliance with sale leg restrictions.
Review and document internal controls to prevent limit breaches given the expanded execution venues.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are a Compliance officer at a bank this circular applies to (All Scheduled Commercial Banks (except RRBs), Primary Dealers), your first concrete step on “G-Sec Short-Selling: Cover Leg Now Allowed Outside NDS-OM” is: “Update internal policies to reflect that cover leg of short sales can be executed outside NDS-OM, including telephone market or primary issuance.” (RBI issued this 01 Jan 2008).
Circular: RBI/2007-2008/220 -- G-Sec Short-Selling: Cover Leg Now Allowed Outside NDS-OM
Issued: 01 Jan 2008
Action required: Update internal policies to reflect that cover leg of short sales can be executed outside NDS-OM, including telephone market or primary issuance.
Action required: Enhance monitoring systems to track short-sale limits across both NDS-OM and non-NDS-OM cover transactions.
Action required: Train treasury and dealing teams on the revised guidelines to ensure compliance with sale leg restrictions.
Action required: Review and document internal controls to prevent limit breaches given the expanded execution venues.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
AI-drafted · 1-model AI consensus fact-check · under the editorial review of our expert review panel · decoded & published by BankPulse · 21 Jun 2026, 01:44 IST
Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=3991&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert review panel. Independent platform, not affiliated with the Reserve Bank of India; never reproduces RBI text verbatim.
Help us keep this accurate
Found an inaccuracy or have an improvement? Tell us. Every report is reviewed by our team before any change is made — nothing goes live unverified.
Public beta — plain-English informational summaries. Always verify against the official RBI source (circular number cited on every page) before making compliance, credit, treasury, audit, or operational decisions. · Join our WhatsApp channel ↗
BANKPULSE · FREE DAILY BRIEF
Get RBI updates for your role
Every important RBI update, decoded in plain English — for your career, exams & financial awareness.
We collect only your email, name and role, used solely to send your brief — never sold or shared. Withdraw anytime via the unsubscribe link in any email. Independent platform, not affiliated with the RBI. Information, not legal advice.
REPORT AN ERROR · BETA
Spotted an error? Earn 500 BankPulse Credits
Help us stay accurate. If your correction is verified true and approved by our founder, you earn 500 BankPulse Credits — redeemable when the platform monetises.
Reviewed by a human before any credit is awarded. We never change the site from crowd input without verification.
WANT A NEW FEATURE · BETA
What would make BankPulse more useful for you?
Tell us what to build next — a tool, a data view, a role page, anything. We read every suggestion.
Thank you — your ideas directly shape what we build.