TMI Blog‘Voluntary Retention Route’ (VRR) for Foreign Portfolio Investors (FPIs) investment in debtX X X X Extracts X X X X X X X X Extracts X X X X ..... Exchange Management (Borrowing and Lending) Regulations, 2018 notified vide Notification No. FEMA 3(R)/2018-RB dated December 17, 2018 ; c. Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2017 notified vide Notification No. FEMA.20(R)/2017-RB dated November 07, 2017 ; and d. Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 notified vide Notification No. FEMA 25/RB 2000 dated May 03, 2000 . 2. A reference is also invited to the discussion paper on Voluntary Retention Route (VRR) for investments by Foreign Portfolio Investors (FPIs) released by the Reserve Bank on October 05, 2018. The VRR scheme has been finalized after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any other law. Yours faithfully (T. Rabi Sankar) Chief General Manager Annex Voluntary Retention Route (VRR) for Foreign Portfolio Investors (FPIs) investment Introduction The Reserve Bank, in consultation with the Government of India and Securities and Exchange Board of India (SEBI), introduces a separate channel, called the Voluntary Retention Route (VRR), to enable FPIs to invest in debt markets in India. Broadly, investments through the Route will be free of the macro-prudential and other regulatory norms applicable to FPI investments in debt markets, provided FPIs voluntarily commit to retain a required minimum percentage of their investments in India for a period. Participation through t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment Facility and the Marginal Standing Facility. viii. VRR-Corp shall mean Voluntary Retention Route for FPI investment in Corporate Debt Instruments. ix. VRR-Govt shall mean Voluntary Retention Route for FPI investment in Government Securities. 3. Eligible investors Any FPI registered with SEBI is eligible to participate through this Route. Participation through this Route shall be voluntary. 4. Eligible instruments a. Under VRR-Govt, FPIs will be eligible to invest in any Government Securities i.e., Central Government dated Securities (G-Secs), Treasury Bills (T-bills) as well as State Development Loans (SDLs). Under VRR-Corp, FPIs may invest in any instrument listed under Schedule 5 of Foreign Exchange Manag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... voluntary retention period, subject to the following relaxations: i. The minimum investment of an FPI during the retention period shall be 75% of the CPS (The flexibility for modulating investments between 75%-100% of CPS is intended to enable FPIs to adjust their portfolio size as per their investment philosophy). ii. The required investment amount shall be adhered to on an end-of-day basis. For this purpose, investment shall include cash holdings in the Rupee accounts used for this Route. g. Amounts of investment shall be reckoned in terms of the face value of securities. 6. Management of portfolio a. Successful allottees are required to invest 25% of their CPS within one month and the remaining amount within th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n limit or single/group investor-wise limits applicable to corporate bonds as specified in paragraphs 4(b), (e) and (f) respectively of A.P. (DIR Series) Circular No. 31 dated June 15, 2018. b. Income from investments through the Route may be reinvested at the discretion of the FPI. Such investments will be permitted even in excess of the CPS. 8. Access to other facilities a. FPIs investing through the Route will be eligible to participate in repos for their cash management, provided that the amount borrowed or lent under repo shall not exceed 10% of their investment under VRR. b. FPIs investing under this route shall be eligible to participate in any currency or interest rate derivative instrument, OTC or exchange tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... descending order of retention period, the highest first, until the amounts of accepted bids add up to the auction amount. e. Allotment at margin (i.e., at the lowest retention period accepted), in case the amount bid at margin is more than the amount available for allotment, shall be as below: i. The marginal bid shall be allocated partially such that the total acceptance amount matches the auction amount. ii. In case there are more than one marginal bids, allocation shall be made to the bid with the largest amount, and then in descending order of amount bid until the acceptance amount matches the auction amount. iii. In case the amount offered is the same for two or more marginal bids, the amount will be allocated equ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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