Skip to main content

What is Voluntary Retention Route (VRR)?

Voluntary Retention Route (VRR) is a channel for Foreign Portfolio Investors (FPIs) to invest in debt markets in India.

What is Voluntary Retention Route (VRR)?

Reserve Bank of India (RBI), in consultation with the Government of India and Securities and Exchange Board of India (SEBI), introduced on March 01, 2019, a separate channel called the ‘Voluntary Retention Route’ (VRR), to enable Foreign Portfolio Investors (FPIs) to invest in debt markets in India. 

Who are eligible investors under VRR?

Any FPI registered with SEBI is eligible to participate through VRR. Participation through this Route is voluntary.

What are the categories of investment under VRR?

Category Voluntary Retention Route for FPI investment in
‘VRR-Corp’ Corporate Debt Instruments
‘VRR-Govt’ Government Securities
‘VRR-Combined’ Instruments eligible under both VRR-Govt and VRR-Corp

Which instruments are eligible under VRR?

  • Under VRR-Govt, FPIs are eligible to invest in any Government Securities i.e., Central Government dated Securities (G-Secs), Treasury Bills (T-bills) as well as State Development Loans (SDLs). 
  • Under VRR-Corp, FPIs may invest in any instrument listed under Schedule 1 to Foreign Exchange Management (Debt Instruments) Regulations, 2019, other than those specified at 1A(a) and 1A(d) of that schedule. However, investments in Exchange Traded Funds investing only in debt instruments are permitted.
  • Repo transactions, and reverse repo transactions. ‘Repo’ and ‘Reverse Repo’ have the same meaning as defined in Section 45U(c) of Reserve Bank of India Act, 1934; and excludes repo and reverse repo conducted under the Liquidity Adjustment Facility and the Marginal Standing Facility.

What are the investment limits under VRR?

  • The investment limit under VRR has been increased from ₹1,50,000 crore to ₹2,50,000 crore with effect from April 01, 2022.
  • Investment limits is available ‘on tap’ and allotted on ‘first come, first served’ basis. The ‘tap’ is kept open till the limit is fully allotted.
  • Investment through VRR is in addition to the General Investment Limit. ‘General Investment Limit’, for any one of the three categories, viz., Central Government Securities, State Development Loans or Corporate Debt Instruments, means FPI investment limits announced for these categories under the Medium Term Framework.
  • Investment under VRR is allocated among VRR-Govt, VRR-Corp, and VRR-Combined as decided by RBI.

What is the minimum retention period under VRR?

  • The minimum retention period is 3 years.
  • Retention Period is the time period that an FPI voluntarily commits for retaining the Committed Portfolio Size (CPS) in India.
  • Committed Portfolio Size (CPS), for an FPI, is the amount allotted to that FPI.

What options are available to FPIs at the end of retention period?

Prior to the end of the committed retention period, an FPI may opt to continue investments under VRR for an additional identical retention period. 

In case an FPI decides not to continue under VRR at the end of the retention period, it may –

  1. Liquidate its portfolio and exit, or 
  2. Shift its investments to ‘General Investment Limit’, subject to availability of limit under ‘General Investment Limit’, or 
  3. Hold its investments until its date of maturity or until it is sold, whichever is earlier

FPIs that wish to exit their investments (fully / partly), prior to the end of the retention period may do so by selling their investments to another FPIs. 

What are other requirements under VRR?

  • FPIs shall open one or more separate Special Non-Resident Rupee (SNRR) account for investment through the Route. 
  • FPIs may open a separate security account for holding debt securities under VRR.
  • FPIs may apply for investment limits online to Clearing Corporation of India Ltd. (CCIL) through their respective custodians.

What are the benefits of investing through VRR?

  • Investments through VRR are free of the macro-prudential and other regulatory norms applicable to FPI investments in debt markets, provided FPIs voluntarily commit to retain a required minimum percentage of their investments in India for a period. 
  • Income from investments through VRR may be reinvested. Such investments is permitted even in excess of the CPS.
  • FPIs investing through VRR are eligible to participate in repos for their cash management, provided that the amount borrowed / lent under repo shall not exceed 10% of their investment under VRR.
  • FPIs investing under VRR are eligible to use any currency / interest rate derivative instrument, OTC / exchange traded, to manage their interest rate risk or currency risk.

Which are the channels for FPIs to invest in debt markets?

Foreign Portfolio Investors (FPIs) can invest in government securities and corporate bonds through three channels –

  1. Medium-Term Framework (MTF) introduced in October 2015
  2. Voluntary Retention Route (VRR) introduced in March 2019
  3. Fully Accessible Route (FAR) introduced in April 2020


References

Reserve Bank of India. (2022, February 10). '‘Voluntary Retention Route’ (VRR) for Foreign Portfolio Investors (FPIs) investment in debt'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12228&Mode=0

Reserve Bank of India. (2022, February 10). 'RBI reopens allotment of investment limit under the Voluntary Retention Route for Investments by Foreign Portfolio Investors'. Retrieved from https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=53256#:~:text=The%20investment%20limit%20under%20VRR,period%20shall%20be%20three%20years.


Follow at - Telegram   Instagram   LinkedIn   Twitter

Labels:

Comments

Post a Comment

Popular Posts

Modified Interest Subvention Scheme for Agricultural Loans

Reserve Bank of India (RBI) has published the modified interest subvention scheme (MISS) for short term loans for agriculture and allied activities availed through Kisan Credit Card (KCC) during the financial year 2025-26. Which loans are covered under modified interest subvention scheme (MISS)? The short-term crop loans and short-term loans for allied activities including animal husbandry, dairy, fisheries, bee keeping etc. up to an overall limit of ₹3 lakh to farmers through KCC during the year 2025-26 will be covered for interest subvention. Which lending institutions are covered under MISS? The MISS is applicable to the lending institutions viz. Public Sector Banks (PSBs) and Private Sector Banks (in respect of loans given by their rural and semi-urban branches only), Small Finance Banks (SFBs) and computerized Primary Agriculture Cooperative Societies (PACS) ceded with Scheduled Commercial Banks (SCBs), on use of their own resources.  How much is the interest subvention? The a...
Post a Comment
Read more

Internal Ombudsman for Regulated Entities (Banks, NBFCs, PPI Issuers and CICs)

Reserve Bank of India (RBI) has issued directions on Internal Ombudsman for regulated entities. To whom shall the directions on Internal Ombudsman (IO) be applicable? The directions on IO shall be applicable to the following Regulated Entities (REs) – Commercial Banks (other than Small Finance Banks, Payment Banks, and Local Area Banks) having 10 or more banking outlets in India as on March 31, 2025, whether such bank is incorporated in / outside India Small Finance Banks having 10 or more banking outlets in India as on March 31, 2025 Payments Banks having 10 or more banking outlets in India as on March 31, 2025 Non-Banking Financial Companies (NBFCs) fulfilling the following criteria as on March 31, 2025 – Deposit-taking NBFCs (NBFCs-D) with 10 or more branches Non-Deposit taking NBFCs (NBFCs-ND) with asset size of ₹5,000 crore and above and having public customer interface Non-Bank Prepaid Payment Instruments Issuers having more than 1 crore Prepaid Payment Instruments (PPIs) outstan...
Post a Comment
Read more

Digital Payments Awareness Week 2026

Reserve Bank of India (RBI) is observing digital payments awareness week from March 09 to 15, 2026. Digital Payments Awareness Week (DPAW) Digital Payments Awareness Week (DPAW) is an initiative to highlight the impact and importance of digital payments and to create awareness about safe usage of digital payment products.  Digital Payments Awareness Week (DPAW) 2026 Reserve Bank of India (RBI) is observing DPAW 2026 from March 09 to 15, 2026.  Under the mission ‘Har Payment Digital’, the theme for the current year is ‘Thoda Dhyan Se’ (be alert/ be careful). The theme emphasises the safe use of digital payments. ‘Har Payment Digital’ mission RBI had launched the mission ‘Har Payment Digital’ on the occasion of the DPAW 2023. This is part of RBI’s endeavour to make every person in India a user of digital payments. Previous Digital Payments Awareness Weeks (DPAWs) Year Theme 2025 ‘India Pays Digitally’ under the mission ‘Har Payment Digital’ ...
Post a Comment
Read more

Export and Import of Goods and Services

Reserve Bank of India (RBI) has issued regulations on export and import of goods and services. What are the regulations for declaration of exports? An exporter of goods shall furnish to the specified authority, a declaration in the Export Declaration Form (EDF) specifying the amount representing the full export value of goods, at the time of export. EDF will be deemed to be submitted as part of shipping bill for goods exported through Electronic Data Interchange (EDI) port. An exporter of services shall furnish to the specified authority, a declaration in EDF specifying the amount representing the full export value of services, within 30 days from the end of month in which invoice for services has been raised. The exporter of services who has exported services to one or more recipients in a month, may submit a single EDF for all such exports. The exporter of services other than software, may submit an EDF on or before the date of receipt of payment. In the case of a non-EDI port for ex...
Post a Comment
Read more

FEMA - Regulations on Guarantees

Reserve Bank of India (RBI) had issued regulations governing guarantees under the Foreign Exchange Management Act, 1999 (FEMA). What is a guarantee? A guarantee, including a counter-guarantee, means a contract, by whatever name called, to perform the promise, or discharge a debt, obligation or other liability (including a portfolio of debts, obligations or other liabilities), in the event of default by the principal debtor. Who are the participants in a guarantee transaction? Principal debtor – a person in respect of whose default the guarantee is given. Surety – a person who gives a guarantee. Creditor – a person to whom the guarantee is given. When can a person resident in India act as surety / principal debtor? A person resident in India may act as a surety / principal debtor for a guarantee, subject to conditions that – The underlying transaction for which the guarantee is being given or arranged is not prohibited under FEMA guidelines. The surety and the principal debtor are eligi...
Post a Comment
Read more