The Reserve Bank of India (RBI) plans to permit Foreign Institutional Investors (FIIs) registered with market regulator SEBI and sub-accounts of FIIs to short sell, lend and borrow equity shares of India companies from February 1, 2008.
However, the entire FII short selling, lending and borrowing mechanism will be subject to the current FDI policy, which allows FDI ranging from 26% to 100% across different sectors.
RBI said in a notification on its web site that the short selling of equity shares by FIIs shall not be permitted for equity shares that are in the ban list and /or caution list of Central Bank.