In a major move aimed at deepening India’s cash equities market and aligning regulatory frameworks with global standards, the Securities and Exchange Board of India (SEBI) will form a working group to review short-selling norms and the Securities Lending and Borrowing Mechanism (SLBM). SEBI Chairman Tuhin Kanta Pandey announced the initiative during the Global Leadership Summit 2025, signaling a broader push to modernize India’s capital market infrastructure.
The review will focus on enhancing transparency, improving price discovery, and facilitating stronger interlinkages between the cash and derivatives segments. Pandey emphasized that both short-selling and SLBM frameworks—introduced in 2007 and 2008 respectively—have remained largely unchanged and are underdeveloped compared to international benchmarks.
🧠 Key Highlights from SEBI’s Announcement
| Attribute | Details |
|---|---|
| Announced By | SEBI Chairman Tuhin Kanta Pandey |
| Occasion | Global Leadership Summit 2025 |
| Date | November 7, 2025 |
| Objective | Review and overhaul short-selling and SLBM norms |
| Target Outcome | Deepen cash market, improve price discovery, align with global practices |
The working group will include market participants, regulatory experts, and institutional stakeholders.
📊 Timeline of Short-Selling and SLBM Evolution in India
| Year | Milestone Description | Impact |
|---|---|---|
| 2007 | Short-selling framework introduced | Allowed institutional short positions |
| 2008 | SLBM mechanism launched | Enabled securities lending and borrowing |
| 2012 | Minor SLBM modifications | Limited expansion, low adoption |
| 2025 | SEBI announces comprehensive review | Signals reform and modernization |
The frameworks have not kept pace with market growth, prompting calls for reform.
🗣️ Reactions from Market Experts and Institutions
| Stakeholder | Commentary Summary |
|---|---|
| NSE Officials | “A robust SLBM can unlock liquidity and efficiency.” |
| Institutional Investors | “We need global-grade short-selling mechanisms.” |
| Brokers and Traders | “This review is long overdue.” |
| Analysts | “India’s SLBM is underutilized due to structural gaps.” |
The move has been widely welcomed by market participants seeking operational clarity and flexibility.
📌 Strategic Implications for Indian Capital Markets
| Area | Potential Impact |
|---|---|
| Market Liquidity | Enhanced through active SLBM participation |
| Price Discovery | Improved via transparent short-selling |
| Risk Management | Better hedging tools for institutional investors |
| Regulatory Alignment | Closer integration with global financial systems |
The review is expected to address operational bottlenecks and investor concerns.
📈 Comparative Snapshot – SLBM and Short-Selling Globally
| Country | SLBM Adoption | Short-Selling Norms | Regulatory Oversight |
|---|---|---|---|
| United States | High | Permitted with disclosure | SEC |
| United Kingdom | Moderate | Permitted with limits | FCA |
| Japan | High | Strict disclosure rules | FSA |
| India | Low | Institutional only | SEBI |
India’s SLBM volume remains significantly lower than global peers, limiting its effectiveness.
📊 Current SLBM Utilization in India
| Metric | Value (2024) | Global Benchmark | Gap Analysis |
|---|---|---|---|
| SLBM Daily Volume | ₹1,200 crore | ₹10,000 crore+ | Large gap |
| Active Participants | 35 | 200+ | Low adoption |
| Securities Available | 150 | 500+ | Limited pool |
| Fee Income for Lenders | ₹25 crore | ₹300 crore+ | Underutilized |
The working group will likely recommend expanding the securities pool and simplifying SLBM access.
📌 Conclusion
SEBI’s decision to form a working group to review short-selling and SLBM frameworks marks a pivotal moment in India’s capital market reform journey. With the goal of enhancing liquidity, transparency, and global competitiveness, the initiative reflects a proactive regulatory stance under Chairman Tuhin Kanta Pandey. As the group begins its work, stakeholders across the financial ecosystem are hopeful for a more dynamic and inclusive market structure.
Disclaimer: This article is based on publicly available regulatory announcements, verified media coverage, and expert commentary. It is intended for informational and editorial purposes only and does not constitute financial or legal advice.
Logical, clear, and very well-explained.