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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 ..... gulations, 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. AD Category - I banks may refer to A.P.(DIR Series) Circular No. 21 dated March 01, 2019 on 'Voluntary Retention Route' (VRR) for Foreign Portfolio Investors (FPIs) investment in debt. Based on the feedback received the directions have been revised as given in the Annex. These changes include, inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bt 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 * 'Committed Portfolio Size' (CPS), for an FPI, shall mean the amount allotted to that FPI. * 'General Investment Limit', for any one of the three categories, viz., Central Government Securities, State Development Loans or Corporate Debt Instruments, shall mean FPI investment limits announced for these categories under the Medium Term Framework, in terms of A.P. (DIR Series) Circular No. 22 dated April 6, 2018, as modified from time to time. * 'Minor violations' shall mean vio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnment 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. * Repo transactions, and reverse repo transactions. 5. Features a. Investment through this Route shall be in addition to the General Investment Limit. Investment under this route shall be capped at ₹ 75,000 crore or higher, which amount shall be allocated among VRR-Govt, V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eckoned in terms of the face value of securities. 6. Management of portfolio * Successful allottees shall invest at least 75% of their CPS within three months from the date of allotment. The retention period will commence from the date of allotment of limit. * 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 decision to its custodian. * In case an FPI decides not to continue under VRR at the end of the retention period, it may: (a) liquidate its portfolio and exit, or (b) shift its investments to the 'General Investment Limit', subject to availability of limit under the 'Genera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll not exceed 10% of their investment under VRR. * FPIs investing under this route shall be eligible to use any currency or interest rate derivative instrument, OTC or exchange traded, to manage their interest rate risk or currency risk. 9. Other operational aspects * Utilisation of limits and adherence to other requirements of this Route shall be the responsibility of both the FPI and its custodian. * 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 stipulated level of 75% of CPS during the retention period. * Custodians shall have in place appropriate legal documentation with FPIs that enables them (custodians) to ensure that reg ..... X X X X Extracts X X X X X X X X Extracts X X X X
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