Monday, 30th October 2017

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Rules eased for foreign portfolio investors

Three months given by RBI to meet the minimum investment requirement

  • Published 23.05.20, 6:48 AM
  • Updated 23.05.20, 6:48 AM
  • a min read
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The VRR scheme, which was introduced in March 2019, was done with the objective to attract long-term and stable FPI investments into India’s debt markets. (Shutterstock)

The Reserve Bank of India (RBI) on Friday gave foreign portfolio investors (FPIs) in the debt markets another three months to meet the minimum investment requirement under the voluntary retention route (VRR) scheme.

The VRR scheme, which was introduced in March 2019, was done with the objective to attract long-term and stable FPI investments into India’s debt markets. Investments through the route are free of certain regulatory prescriptions, provided FPIs voluntarily commit to retain a required minimum percentage of their investments.

FPIs can invest the amount allocated, called the Committed Portfolio Size (CPS), in the relevant debt instruments and remain invested at all times during the voluntary retention period. However, the minimum investment of an FPI during the retention period will be 75 per cent of the CPS though the investors have the flexibility of moving up to 100 per cent, according to their investment philosophy.

“In view of difficulties expressed by FPIs and their custodians on account of Covid-19 related disruptions in adhering to the condition that at least 75 per cent of the allotted limits be invested within three months, it has been decided that an additional three months will be allowed to FPIs to fulfil this requirement,” RBI governor Shaktikanta Das on Friday.

Earlier this year, the RBI had announced a revised VRR scheme which was open for allotment from January 24. Here, the investment limit under the scheme was increased to Rs 1,50,000 crore. The RBI had then said that the investment limit available for fresh allotment will be Rs 90,630 crore and that the minimum retention period shall be three years.

Stocks fall

Benchmark indices snapped their three-session winning streak on Friday as the RBI’s surprise rate cut failed to enthuse investors. Banking and financial stocks led the decline.

After falling over 450 points during the day, the Sensex ended 260.31 points, or 0.84 per cent, lower at 30672.59. The NSE Nifty settled 67 points or 0.74 per cent down at 9039.25.