SEBI Chairman Tuhin Kanta Pandey (file photo) | Photo credit: PTI/SHASHNK PARADE
The short selling framework, introduced in 2007, has remained largely unchanged since its inception. Similarly, the SLB mechanism, which was introduced in 2008 and has been amended several times since, remains underdeveloped compared to global markets, highlighting the need for a thorough reassessment.
Explaining the move, Pandey said, “We will soon form a working group to comprehensively review short selling and the SLB frameworks,” while speaking at the CNBC-TV18 Global Leadership SummitT.
Under the SLB mechanism, investors or institutions holding shares in their demat accounts can lend them to other market participants for a fee.
The transaction is executed through the exchange platform, with the clearing house providing a counter-guarantee to ensure smooth and secure settlement.
Experts noted that borrowers typically use these securities for short-selling or to avoid settlement failures.
By allowing investors to earn additional income from otherwise inactive stocks, the SLB framework not only benefits lenders, but also improves liquidity and overall market efficiency.
Pandey further added that extensive regulatory reviews of stockbrokers and mutual funds are already underway.
“We will soon conduct a similar in-depth review of the Listing Obligations and Disclosure Requirements (LODR) 2015 and settlement rules,” he said.
Pandey also expressed concerns over the outflow of foreign portfolio investors (FPIs) and emphasized that global investors continue to have strong confidence in India’s growth story.
“FPIs have very strong faith in India’s story,” he said in response to a question on the outflow.
While discussions often focus on net outflows, he explained that a significant portion of FPI activity involves primary market investments, which offset movements in the secondary market.
He added that Indian markets are now much more resilient to fluctuations in capital flows. Pandey pointed out that domestic participation has grown significantly, with individual investors now owning about 18 percent of listed companies, backed by robust domestic institutional investors (DIIs).
“FPIs are not subordinate, but are now complemented by strong domestic flows,” he noted, highlighting that FPIs collectively still control about $900 billion of market capitalization in India.
Asked whether the regulator was considering a ban on weekly expirations, Pandey declined to make any definitive comment. “Please don’t put words in my mouth. I think I’ve said enough on this subject. The certainty at this point is that the system is on and working,” he said.
He assured that future decisions would be based on broad consultation.
Pandey said Sebi’s approach will remain calibrated and data-driven, focused on addressing market imperfections without abrupt action. “We are exploring a consultative, database-driven approach,” he explained.
Published on November 7, 2025
#SEBI #review #short #selling #SLB #frameworks #Pandey