RBI reopens scheme for FPI investments in debt

VRR limit doubled to ₹1.5 lakh crore

Published - January 23, 2020 10:23 pm IST - Mumbai

The Reserve Bank of India (RBI) has decided to reopen allotment of the investment limit under the revised Voluntary Retention Route (VRR) for debt investments by foreign portfolio investors (FPIs) from January 24.

The investment limit under VRR has been increased to ₹1,50,000 crore from the ₹75,000 crore of the earlier scheme, with a minimum retention period of three years.

“FPIs that have been allotted investment limits under VRR may, at their discretion, transfer their investments made under the General Investment Limit to VRR,” the RBI said on Thursday. In March 2019, the RBI introduced a separate channel, the ‘Voluntary Retention Route’ , to enable FPIs to invest in debt markets in India. Investments through VRR are free of the macro-prudential and other regulatory prescriptions applicable to FPI investments in debt markets, provided FPIs voluntarily commit to retain a required minimum percentage of their investments in India for a particular period.The RBI said ₹54,300 crore had already been invested under the previous scheme. “Based on the feedback received, and in consultation with the government, the bank has made certain amendments in the scheme to increase its operational flexibility,” it said. Investment limits will be available on tap and allotted on a first-come, first-served basis, the RBI said. Separately, the central bank has raised investment limit for FPIs in government and corporate bonds, in a move to attract more foreign funds into the country.

Prior to the announcement, short-term investments by an FPI could not exceed 20% of the total investment of that FPI in either central government securities (including treasury bills) or State development loans. The same was applicable on investments in corporate bonds. This limit has now been raised from 20% to 30% in both the cases.

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