Hi Nandu,
Here's a more exhaustive explanation covering the meaning of 'rollovers', 'trading ban' and 'Open Interest'.
Trading in the F&O segment means you are trading 'contracts' unlike Equity shares that get traded in the Cash market. There is no asset involved while trading in F&O segment and these contracts are cash settled at the end of their expiry periods. Expiry day in India is:
(a)For Global Indices: Third Friday of every month
(b)For India VIX: Every Tuesday
(c)For All other F&O contracts not forming part of (a) & (b) : Last Thursday of every month
Let us try to understand why or when a contract enters a ban period:
Whenever you want to buy a Future/Option contract, there needs to be a seller. The buyer buys with the assumption that the contract would go up and the seller sells with the assumption that the contract would go down. When a trade happens between the buyer & the seller, there's one 'Open Contract' that comes into being and this is referred to as 'Open Interest'. The Exchanges have a maximum number of such open contracts that they allow for trading in any particular contract. When the number of 'open contracts' exceeds 95% of the total 'allowable contracts' the said contract is said to be under the ban period. While it’s under ban, you cannot add any position [thereby increasing the Open Interest] but are allowed to only offset/reduce your position.
Rollover: A Rollover is when you exit a currently held F&O contract and take a similar position in the next month contract. You do a rollover because your view on the contract you've held remains same but the already held contract ceases to exist soon.
Answering specifically to your question, when you are rolling over a Future contract, you are closing your current month position thereby reducing the Open interest and then adding the same amount of Open interest by taking a new position in the next month contract. This will have NO effect on the total Open Interest allowing you to rollover without any concerns.
To cite an example: Assume you are long in one lot of Reliance Industries January14 Futures. The maximum number of contracts allowed to be traded on Reliance Industries [all expiries] set by the exchange is 50,000 contracts. Assuming there are 47500 [95% of 50,000] open contracts of Reliance Industries Futures, the exchange puts Reliance Industries under ban.
Now if you'd like to rollover, you'd be squaring off your position in Reliance Industries thereby closing 1 'Open position' which reduces the open interest to 47499 and by buying 1 lot of Reliance Industries Feb14 Futures you'd be adding 1 open interest making the total number of Open contracts to 47500. Note that you having done this trade does not change the total Open interest.
You could do a rollover by simply squaring off your position in the current month contract and taking a fresh position in the next month contract. Some brokerages in India automatically identify your rollover and allow you to take fresh positions for a security in ban while in some cases you may have to call your broker asking him to let you rollover a position.