The Securities and Exchange Board of India on Friday decided to work on a plan to allow short selling by institutional investors and to support the same with a stock lending and borrowing system. Sebi is expected to shortly come out with details of a stock lending and borrowing programme.

Sebi chairman M Damodaran after a board meeting here said "Issues of stock lending and borrowing as well as short selling by financial institutions have been a matter of concern for some time and we have addressed them at today's meeting."

Short selling takes place when investors sell shares they actually possess. In the current system, retail investors can sell short during the course of a day's trading, and subsequently during the same trading session execute a purchase transaction to close their position.