Voluntary Retention Route for Foreign Portfolio Investors – Relaxations

The Voluntary Retention Route (‘VRR’) provides a separate channel of investment for Foreign Portfolio Investors (‘FPIs’) to invest in debt markets in India. Investments through this route are 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 voluntarily committed period. By a Circular dated January 23, 2020, the Reserve Bank of India (‘RBI’) approved the following changes in this regard: (a) increased investment cap from Rs 75,000 crore (approx. US$ 9.9 billion) to Rs 150,000 crore (approx. US$ 19.8 billion); (b) FPIs that have been allotted investment limits under VRR may, at their discretion, transfer their investments made under the general investment limit to VRR; and (c) FPIs have been allowed to invest in exchange traded funds that invest only in debt instruments.