The government and the financial sector regulators, the Reserve Bank of India (RBI) and the Securities and Exchange Board of Indian (SEBI), have considered various measures to ease debt investment rules for foreign portfolio investors (FPIs) such as relaxing group exposure thresholds (20%) and the per issue investment limits (50%). In this vein, the RBI issued a discussion paper in October 2018 on voluntary retention route (VRR) to facilitate foreign portfolio investment in debt.
Under VRR, FPIs will have more operational flexibility in terms of instruments as well as exemptions from concentration limits, and group-level and issue-level thresholds. Following the discussion paper, the RBI issued a circular on VRR on 1 March.
All FPIs registered with SEBI are eligible to participate in VRR. Investments under VRR are in addition to the limits prescribed for debt investments. For corporate debt under VRR, the investment limit will be ₹350 billion (US$4.93 billion).
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