Hazrat Hudhaifah bin Al-Yamaan radiyallahu anhu reports that Rasoolullah sallallahu alaihe wasallam caught the shin of my leg, or of his own leg and said, "This is where the lungi should reach, and if not, then a little further down, and if not, then the lungi has no right on the ankle." (For this reason the lungi should not reach over the ankles.
English reference: Book 17, Hadith 115
Arabic reference: Book 18, Hadith 122