The central bank recently cracked down on short-sellers by issuing a notification instructing banks to lodge subsidiary general ledger (SGL) transfer forms, notifying RBI of the deals done and transfers in the bond positions within two days of the deal date rather than the settlement date.

A few banks were taking advantage of the loophole by selling gilts two days forward from the settlement date and buy before the settlement falls due. The whole transaction took place before the SGL form was finally sent to RBI for lodging the transfer. The RBI, as a matter of policy, does not allow forward deals in government securities.

The electronic dealing system will require electronic SGL forms to be lodged with the public debt office (PDO), providing full information about the volume and price of transacted security. The entire transfer process will be on-line with settlements taking place on the date of the deal.