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‘Voluntary Retention Route’ (VRR) for Foreign Portfolio Investors (FPIs) investment in debt

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..... ied 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 taking into consideration the comments and views received, and attached as Annex. 3. Suitable .....

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..... 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 this Route will be entirely voluntary. The features of the Route are explained below in detail. 2. Definitions i. Committed Portfolio Size (CPS), for an FPI, shall mean the amount allotted to that .....

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..... curities. 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 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, other than those specified at 1A(a) and 1A(d) of that Schedule. b. Repo transactions, and reverse re .....

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..... nvestment 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 three months from the date of allotment. The retention period will commence from the date of allotment of limit. b. Prior to the end of the committed retention period, an FPI, if it so desires, may opt to continue investments under this Route for an additional identical retention period. In that case, it shall convey this .....

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..... 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 traded, to manage their interest rate risk or currency risk. 9. Other operational aspects a. Utilisation of limits and adherence to other requirements of this Route shall be the responsibility of both the FPI and its custodian. b. Custodians shall not permit any repatriation from the cash accounts of an FPI, if such transaction leads to the FPI s assets falling below the minimum s .....

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