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RBI reopens scheme for FPI investments in debt
Why is it in the news?
- RBI has decided to reopen allotment of the investment limit under the revised Voluntary Retention Route (VRR) for debt investments by foreign portfolio investors (FPIs) from January 24.
More in the news
- The investment limit under VRR has been increased to ₹1,50,000 crore from the Rs. 75,000 crore of the earlier scheme.
- It has a minimum retention period of three years.
- Discretion:
(1) FPIs that have been allotted investment limits under VRR may, at their discretion, transfer their investments made under the General Investment Limit to VRR.
- Voluntary Retention Route:
(1) In March 2019, the RBI introduced a separate channel, the ‘Voluntary Retention Route to enable FPIs to invest in debt markets in India.
(2) The RBI said Rs. 54,300 crore had already been invested under the previous scheme.
(3) Investment limits will be available on tap and allotted on a first-come, first-served basis.
- Previous Rules:
(1) Prior to the announcement, short-term investments by an FPI could not exceed 20% of the total investment of that FPI in either central government securities (including treasury bills) or State development loans.
(2) The same was applicable on investments in corporate bonds. This limit has now been raised from 20% to 30% in both the cases.
Source
The Hindu.