New Delhi, June 26 -- The Reserve Bank of India has proposed that eligible participants in government securities can maintain short positions as per a set rules. In a draft directions issued on Thursday, the Central Bank has set limits on the government bond market participants can short-sell.

As per the draft directions, for liquid government bonds or securities, short positions can be up to two per cent of the total bonds available in the market, or Rs 500 crore, whichever is higher. "Liquid Government security: 2 per cent of the outstanding stock of the Government security, or Rs 500 crore, whichever is higher," it said.

Meanwhile, for other eligible government securities, short positions can be up to one per cent of the total bonds,...