Intra-day Short Selling of G-Secs Allowed for Select UCBs
Current · Source: Reserve Bank of India · RBI/2013-2014/226 · issued 04 Sep 2013 · ~2 min read
Quick answerRBI now permits well-managed Urban Co-operative Banks meeting specific criteria—NDS-OM membership, net worth ₹25 crore, CRAR ≥9%, net NPA ≤3%, and concurrent treasury audit—to undertake intra-day short selling of government securities, reversing the earlier ban.
The rule, in the simplest words
Only well-managed Urban Co-operative Banks (UCBs) that meet certain rules can now sell government securities (G-Secs) they don't own during the same day, hoping to buy them back cheaper later.
To qualify, a bank must be a member of NDS-OM (a special electronic trading system for government bonds), have a net worth (total assets minus debts) of at least ₹25 crore, a CRAR (a safety cushion ratio) of 9% or more, and net NPAs (bad loans) of 3% or less.
The bank must also have a regular concurrent audit (a check happening at the same time as the work) of its treasury operations and follow sound risk management practices.
Eligible banks must apply to their Regional Office of RBI for permission before they can start intra-day short selling.
Banks must follow all instructions from RBI's Internal Debt Management Department (IDMD) about intra-day short selling.
How it plays out — a real example
A treasury officer in Indore, Priya, works at a UCB that meets all the criteria: it has NDS-OM membership, net worth ₹30 crore, CRAR 10%, and net NPAs 2%. She tells her treasury team they can now apply to the RBI Regional Office for permission to do intra-day short selling of G-Secs, giving them a new way to manage the bank's funds and maybe make a profit if bond prices fall during the day.
What changed
Earlier, UCBs were barred from any short selling of government securities, even intra-day. Now, RBI has allowed select UCBs that meet eligibility conditions to seek permission for intra-day short selling. The move relaxes the 2003 restriction for well-managed banks.
What it means for you
This gives eligible UCBs a new tool for active treasury management, enabling them to profit from price declines in G-Secs within the same trading day. Banks must strengthen risk management and ensure concurrent audit compliance to qualify. It may increase market liquidity but also requires tighter oversight.
What you must do
Check if your bank meets NDS-OM membership, net worth ₹25 crore, CRAR ≥9%, and net NPA ≤3% conditions.
Ensure mandatory concurrent audit of treasury operations is in place and sound risk management practices are documented.
Apply to your Regional Office for permission to undertake intra-day short selling of government securities.
Adhere to all IDMD instructions on intra-day short selling issued from time to time.
Who it affects
Primary (Urban) Co-operative Banks, Treasury departments of eligible UCBs, Regional Offices of RBI processing permissions
❓ Common questions
What is intra-day short selling of government securities?
It means selling G-Secs that the bank does not own at the time of sale, with the obligation to buy them back within the same trading day, to profit from price declines.
Which UCBs are eligible for this facility?
UCBs that are NDS-OM members, have net worth of ₹25 crore or more, CRAR of 9% or above, net NPA not exceeding 3%, and maintain sound risk management with concurrent treasury audit.
Do eligible UCBs automatically get this permission?
No, they must apply to and obtain specific permission from their respective Regional Office of RBI before undertaking such transactions.
📜 Read the original circular — full text as issued by RBI
RBI/2013-2014/226
UBD.BPD. (PCB). Cir.No.9/09.29.000/2013-14
September 4, 2013
The Chief Executive Officers of
All Primary (Urban) Co-operative Banks
Madam/Dear Sir,
Secondary Market Transactions in Government
Securities - Intra-day short selling
Please refer to our circular UBD.BPD.PCB.Cir.39/09.29.00/2002-03 dated March 13, 2003 , in terms of which Urban Co-operative Banks were permitted to trade in Government Securities on the Stock Exchanges, but were not permitted to undertake short selling of Government securities, even on an intra-day basis.
2. It has been decided to permit well managed Urban Co-operative Banks, who are members of NDS-OM and have regular concurrent audit of their treasury operations, to undertake intra-day short selling of Government Securities. Accordingly, Urban Co-operative Banks, fulfilling the following conditions are required to seek permission from the Regional Offices concerned to undertake such transactions.
NDS-OM Membership.
Net Worth of ` 25 crore, CRAR of 9% or more and net NPA of not more than 3%.
Sound risk management practices and mandatory concurrent audit of their Treasury Operations.
3. Urban Co-operative Banks are advised to adhere to the instructions/directions as prescribed by Internal Debt Management Department of Reserve Bank of India for intra-day short selling of Government Securities from time to time.
Yours faithfully,
(A.K.Bera)
Principal Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2013-2014/226 · issued 04 Sep 2013. The plain-English explanation above is BankPulse’s own independent summary.
Ensure mandatory concurrent audit of treasury operations is in place and sound risk management practices are documented.
💰 Credit
Check if your bank meets NDS-OM membership, net worth ₹25 crore, CRAR ≥9%, and net NPA ≤3% conditions.
📜 Compliance
Apply to your Regional Office for permission to undertake intra-day short selling of government securities.
Adhere to all IDMD instructions on intra-day short selling issued from time to time.
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 Credit Manager at a bank this circular applies to (Primary (Urban) Co-operative Banks, Treasury departments of eligible UCBs, Regional Offices of RBI processing permissions), your first concrete step on “Intra-day Short Selling of G-Secs Allowed for Select UCBs” is: “Check if your bank meets NDS-OM membership, net worth ₹25 crore, CRAR ≥9%, and net NPA ≤3% conditions.” (RBI issued this 04 Sep 2013).
Circular: RBI/2013-2014/226 -- Intra-day Short Selling of G-Secs Allowed for Select UCBs
Issued: 04 Sep 2013
Action required: Check if your bank meets NDS-OM membership, net worth ₹25 crore, CRAR ≥9%, and net NPA ≤3% conditions.
Action required: Ensure mandatory concurrent audit of treasury operations is in place and sound risk management practices are documented.
Action required: Apply to your Regional Office for permission to undertake intra-day short selling of government securities.
Action required: Adhere to all IDMD instructions on intra-day short selling issued from time to time.
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.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=8375&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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