FPIs get more time to invest under voluntary retention route

The Reserve Bank of India (RBI) on Friday permitted more time to foreign portfolio investors (FPIs) in adhering with the condition under the Voluntary Retention Route (VRR) wherein at least 75% of allotted limits have to be invested within three months.

The central bank said on Friday that taking into account the current conditions an additional three months will be allowed to FPIs to fulfil this requirement. The VRR route was introduced in March last year wherein FPIs have to invest the amount allocated, called the committed portfolio size (CPS), in relevant debt instruments and remain invested at all times during the voluntary retention period, subject to certain relaxations. The minimum retention period was kept at three years. With the new relaxation, FPIs that have been allotted investment limits between January 24 and April 30 this year, will get an additional time of three months.

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The RBI had earlier said that successful allottees will have to invest at least 75% of their CPS within three months from the date of allotment. In January this year, the central bank had brought in some relaxations for investments under the VRR route. The RBI had increased the investment cap from Rs75,000 crore to Rs1.5 lakh crore under the VRR. It also notified that FPIs that have been allotted investment limits under VRR may transfer their investments made under the general investment limit to VRR. The central bank had also said that FPIs are also allowed to invest in exchange traded funds that invest only in debt instruments.

As part of the measures to improve the functioning of financial markets announced on Friday, the RBI also permitted the special refinance facility of Rs15,000 crore provided to SIDBI for on-lending/refinancing to be rolled-over for a period of 90 days at the end of the 90th day. Advances under this facility were provided at the RBI’s policy repo rate at the time of availment for a period of 90 days.

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