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FPI investment cap via VRR route hiked to Rs 1,50,000 crore

“The investment limit under VRR has been increased to Rs 150,000 crore. The investment limit available for fresh allotment will accordingly be Rs 90,630 crore (net of extant allotments and adjustments) and it will be allotted under the VRR–Combined category,” the RBI said.

By: ENS Economic Bureau | Mumbai | Published: January 24, 2020 6:04:19 am
Operation Twist makes India long-tenor debt Asia’s top performer The RBI issued a discussion paper on October 5, 2018 proposing a special channel — VRR route — for FPIs.

The Reserve Bank of India (RBI) has doubled the investment limit under the Voluntary Retention Route (VRR) for foreign portfolio investors (FPIs) to Rs 1,50,000 crore “with a view to attract long-term and stable FPI investments into debt markets”.

After the route was opened on March 1, 2019, an amount of Rs 75, 000 crore was offered for investment in two tranches so far. As on December 31, 2019, around Rs 54,300 crore has already been invested under the scheme. Based on the feedback received, and in consultation with the government, the RBI has made certain amendments in the scheme to increase its operational flexibility which will be open for allotment from January 24, 2020, RBI said.

“The investment limit under VRR has been increased to Rs 150,000 crore. The investment limit available for fresh allotment will accordingly be Rs 90,630 crore (net of extant allotments and adjustments) and it will be allotted under the VRR–Combined category,” the RBI said.

The minimum retention period will be three years, the RBI said. Investment limits will be available ‘on tap’ and allotted on ‘first come, first served’ basis. “The ‘tap’ will be kept open till the limit is fully allotted. FPIs may apply for investment limits online to Clearing Corporation of India Ltd (CCIL) through their respective custodians,” the central bank said.

The RBI issued a discussion paper on October 5, 2018 proposing a special channel — VRR route — for FPIs.

Investments via VRR would be free of the macro-prudential and other regulatory norms applicable to FPI investments in debt markets. Investments made via VRR will not be subject to any minimum residual maturity requirement (cap on short-term investments at 20 per cent of portfolio size), concentration limit or single/ group investor wise limits applicable to corporate bonds (50 per cent of a single issue) as specified in circular No 313 issued by the RBI, and modified from time to time.

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