Mumbai: The Securities and Exchange Board of India (Sebi) said new rules for stock lending and borrowing will be in place in a month.

New guidelines: Sebi chairman C.B. Bhave. Abhijit Bhatlekar / Mint

“Once the software is in place, the new stock lending programme will be operational," C.B. Bhave, chairman of Sebi, said on Tuesday at the Indian Securities Forum conference.

The move is aimed at curtailing overseas investors from short-selling equities using offshore derivatives. Lending and borrowing by overseas investors are being monitored and “stronger" steps will be taken if necessary, the regulator said on 20 October.

India is stepping up the monitoring of sales by overseas funds after regulators from the US to Europe and Australia banned short sales, where traders sell borrowed securities with the hope of buying them back at a lower price, on concern investors took advantage of the credit crisis to hammer prices. Sebi is extending the stock landing and borrowing period as short-selling, when undertaken properly through the bourses, is good for a healthy market, Bhave said.

Indian stock exchanges that want to sell from 5% to 15% of their equity to single overseas investors need to seek permission from the finance ministry and the Reserve Bank of India, Bhave said. Sebi currently allows only domestic investors to do so, he said.

Sebi is studying the best model for the settlement of derivative trades and whether this should be done so in cash or squared up physically at the end of the monthly contract, Bhave said. The current practice of cash settlement is working well, he added.