Voluntary Retention Route

A Voluntary Retention Route (VRR) was introduced by the Reserve Bank of India (RBI), a channel to enable FPIs (Foreign Portfolio Investors) to invest in debt markets in India. 

All the investments made through this VRR RBI are free of the macro-prudential (a term used to describe regulations and methods of confirming that financial institutions do not take excessive risks) and other regulatory instructions appropriate to FPI investments in debt markets. However, FPIs must deliberately pledge to retain a vital minimum percentage of their investments in India for a time period of their choice. 

So,? Well! The aim/objective of VRR is to attract long-lasting and secured FPI investments in India's debt markets while offering FPIs with functional flexibility to direct their investments.

On this page, we will understand what is VRR,  and what is the aim of VRR. We will also learn in detail about the Voluntary Retention Route RBI, along with the facts and information on the Voluntary Retention Route.

What is VRR - Understanding the Significance of the VRR RBI Channel 

RBI in collaboration with the government of India and the SEBI (Securities and Exchange Board Of India) introduced VRR channel to allow FPS to invest in Indian debt markets. The name of this channel portrays that the investment is entirely voluntary and the investment via this route is free of the macro-prudential or the other regulatory prescriptions. 

So, what is the aim of VRR? Well! VRR scheme aims to draw/attract foreign investors who are deliberately committed to restoring money for a minimum period  in India. In return, they will get more functional freedom than regular foreign debt investors.

What is Voluntary Retention Route - All About the Voluntary Retention Route

• RBI had introduced a separate scheme referred to as VRR to inspire Foreign Portfolio Investors (FPIs) to adopt long-time period investments in Indian debt markets.

• Under this scheme, FPIs were given more operational flexibility in phrases of device selections except exemptions from positive regulatory requirements.

When Was VRR Launched?

RBI launched a new investment channel for FDI on 1 March 2019 to promote long-term investment in Indian debt markets (this plan was subsequently revised on 1 March 2019). May 24, 2019, there is no detailed information and regulatory standards that apply to FDI investments in the debt market and provide operational flexibility to manage these investments. 

Under this method FDIs voluntarily promise to hold the obligatory minimum percentage of their investments for at least 3 years. 

The VRR scheme was again revised on January 23, 2020, therefore, extending its presence and providing certain mitigations for FPI.

Voluntary Retention Route RBI - VRR Scheme Key Features

• FPI must hold at least 75% of the approved portfolio size for a minimum of 3 years.  

• The assignment of the investment amount will be through a tap or auction, FPI (including the relevant FPIs) will be assigned a maximum investment limit of up to 50% of the amount offered for each prize if there is a demand of more than 100%. quantity provided. 

• FPIs may choose to convert their investments made under the Total Investment Limit, if applicable, to a VRR scheme. 

• FPI may request an online investment limit from Clearing Corporation of India Ltd. (CCIL) through their respective leaders.  

• Investments on this route will be capped at Rs. 1.50,000 / crore (formerly crore 75,000) or more, allocated to the following classes of securities, designated from time to time by the RBI. 

• VRRCorp: Roadmap for FPI's Voluntary Investment in Corporate Debt Instruments. 

• "VRRGovt": a path to voluntarily hold CPI investments in government securities. 

• "VRRCombined": Voluntary withholding path for FPI investment in qualifying instruments for VRRGovt and VRRCorp. 

Easing of the Following Parameter:

(a) the minimum remaining maturity, 

(b) the concentration limit, 

(c) the limit for individual/group investors for corporate bonds, as stipulated in the RBI 

Circular of June 15, 2018 when the risk limit does not exceed 20 % of the corporate bond portfolio for the company (including corporate-related businesses), however, the investment limit for any FDI, including investment in eligible FDI, must not exceed 50% of any bond issue other than investment Multilateral Financial Institutions and CPI investment in securities tax-exempt papers. 

FPI will open one or more separate Specialized Non-Resident Rupees (SNRR) accounts for investment via the Route. All investment related cash flows through VRR will be reflected in the specified account (s).

VRR - Facts and Information on the Voluntary Retention Route

The facts and information on VRR lie hereunder:

• The blended funding limit will be ₹ 40,000 crores for VRR-Govt and ₹ 35,000 crores for VRR-Corp.

• The minimal retention duration will be 3 years. During this duration, FPIs shall preserve at the very least 75% of the allotted quantity in India.

• Investment limits will be to be had on faucet for investments and will be allocated through Clearing Corporation of India Ltd. (CCIL) on a ‘first come first served’ basis.