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;
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.
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.