How is this possible? I thought in FnO segment, one can only square off open positions, once a script is in ban period. When one is squaring off open position, the OI has to reduce. How can it increase?
It is possible, if brokers allow trading in Ban Scrips specified by exchange the OI can increase. Its a broker responsibility to not to allow trading. If they allow, the penalty is quite high to take the position and the trader has to bear it.
As @basu says, the OI restriction means that taking a trade would lead to a penalty. The exchange itself doesn’t block these trades. NSE website says
At the end of each day during which the ban on fresh positions is in force for any security, when any member or client has increased his existing positions or has created a new position in that security the client/trading members will be subject to a penalty 1% of the value of increased position subject to a minimum of Rs.5000 and maximum of Rs.100000. The positions, for this purpose, will be valued at the underlying close price