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Co-op banks to short-sell govt bonds on intra-day basis: RBI

Earlier, urban co-operative banks were allowed to trade in government securities on the stock exchanges, but were not permitted to undertake short selling

September 05, 2013 10:23 IST | India Infoline News Service
The Reserve Bank of India (RBI) has allowed urban cooperative banks to undertake short selling of government bonds on an intra-day basis.

“It has been decided to permit well-managed urban cooperative banks, who are members of negotiated dealing system-order matching (NDS-OM) and have regular concurrent audit of their treasury operations, to undertake intra-day short selling of government securities,” said RBI in a notification on Wednesday.

Earlier, urban co-operative banks were allowed 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.

RBI has laid down three conditions for urban cooperative banks to undertake these transactions.

The urban cooperative bank should have an NDS-OM membership, a net worth of Rs 25 crore, capital-to-risk weighted assets ratio (CRAR) of 9% or more and net non-performing asset (NPA) of not more than 3%.

Besides, banks should have followed sound risk management practices and mandatory concurrent audit of their treasury operations, RBI said.

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