Voluntary Retention Route (VRR) for FPI
Investments Scheme Released
[RBI/2018-19/135-A.P. (DIR Series) Circular No. 21
dated March 01, 2019]
Sub: ‘Voluntary Retention Route’ (VRR) for Foreign
Portfolio Investors (FPIs) investment in debt
Attention
of Authorised Dealer Category-I (AD Category-I) banks is invited to the
following regulations, as amended from time to time, and the relevant
directions issued under these regulations.
a. Foreign Exchange
Management (Permissible Capital Accounts Transactions) Regulations, 2000
notified vide Notification No. FEMA 1/2000-RB dated
May 03, 2000;
b. Foreign
Exchange Management (Borrowing and Lending) Regulations, 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.
A reference is also invited to the discussion paper on
‘Voluntary Retention Route’ (VRR) for investments by Foreign Portfolio
Investors (FPIs) released by the Reserve Bank on October 05, 2018. The VRR
scheme has been finalized after taking into consideration the comments and views received, and
attached as Annex.
3.
Suitable amendments have been made to regulations under the Foreign Exchange Management
Act, 1999 (Act 42 of 1999) to enable FPIs participating in the VRR scheme to
hedge their interest rate and exchange rate risks related to their investments
under the scheme and to undertake repo/reverse repo transactions to meet their
liquidity requirements. A copy of the following amendments notified in the
Official Gazette is enclosed.
a) Notification
No. FEMA 390/2019-RB dated February 26, 2019 (GSR. No 161 (E) dated
February 27, 2019);
b) Notification
No. FEMA 391/2019-RB dated February 26, 2019 (GSR. No 162 (E) dated
February 27, 2019);
c) Notification
No. FEMA 3 (R)1/2019-RB dated February 26, 2019 (GSR. No 163 (E)
dated February 27, 2019);
and
d) Notification
No. FEMA 20 (R)5/2019-RB dated February 26, 2019 (GSR. No 164 (E)
dated February 27, 2019)
4.
A reference is also invited to A.P. (DIR Series) Circular No. 22
dated March 01, 2019
on hedging of exchange rate risk by Foreign
Portfolio Investors under Voluntary Retention Route, issued today (March 01,
2019).
5.
These directions shall be applicable with immediate effect.
6.
The directions contained in this circular have been issued under sections 10(4)
and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are
without prejudice to permissions/ approvals, if any, required under any other
law.