The Reserve Bank of India has allowed lenders to hold long and short positions in government bonds in their trading portfolios, and said they can short sell the securities only if they cover their positions through purchases in the market.
Earlier, banks used to go short in the held-for-trade portfolio and cover their positions by shifting out securities from the other portfolios, available-for-sale (AFS) and hold-to-maturity (HTM).
While banks can hold securities for short-term trading in their HFT portfolios, they need to keep securities for a slightly longer period in AFS.