RBI approves short selling by foreign funds

MUMBAI (Reuters) - The Reserve Bank of India (RBI) on Tuesday said it had given approval to foreign funds to short sell, lend and borrow shares of Indian companies, although domestic stock markets are yet to set a starting date for the new measures.

The market regulator, Securities and Exchange Board of India, had already approved short-selling by all kinds of investors. Before short-selling can start, the Bombay Stock Exchange and the National Stock Exchange are upgrading their operating systems.

The RBI said foreign institutional investors (FIIs) could not short sell, lend or borrow shares in companies which had reached their foreign investment limit or in firms where the central bank's permission was required to purchase shares from the market.

The central bank said borrowing of shares by FIIs would only be for delivery for short sales, and margins or collateral could only be held in cash.

The statement is on the central bank's Web site, www.rbi.org.in.