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

Reserve Bank - Integrated Ombudsman Scheme, 2026 (RB-IOS, 2026)

Reserve Bank of India (RBI) has issued Reserve Bank - Integrated Ombudsman Scheme, 2026. Who is RBI Ombudsman and RBI Deputy Ombudsman? RBI may appoint one or more of its officers as RBI Ombudsman and RBI Deputy Ombudsman, to carry out the functions entrusted to them under the Reserve Bank - Integrated Ombudsman Scheme (RB-IOS).  The appointment of RBI Ombudsman or RBI Deputy Ombudsman shall be for up to 3 years at a time. RBI Ombudsman shall have the power to examine and close all complaints.   RBI Deputy Ombudsman shall have the power to close those complaints falling under clause 10 of the RB-IOS (i.e. non-maintainable complaints) and complaints resolved as per the provisions of the clause 14(8)(a) to 14(8)(c) of the RB-IOS (i.e. complaint resolved / withdrawn). Which entities are covered under the RB-IOS? RB-IOS shall be applicable to the following Regulated Entities (REs) – Commercial Banks Regional Rural Banks  State Co-operative Banks Central Co-operative Bank...
Post a Comment
Read more

Financial Literacy Week (FLW) 2026

Reserve Bank of India (RBI) has observed financial literacy week from February 09 to 13, 2026. Financial Literacy and Financial Education Organization for Economic Co-operation & Development (OECD) defines ‘financial literacy’ as a combination of financial awareness, knowledge, skills, attitude and behaviour necessary to make sound financial decisions and ultimately achieve individual financial well-being.  OECD defines ‘financial education’ as the process by which financial consumers / investors improve their understanding of financial products, concepts and risks and through information, instruction and / or objective advice, develop the skills and confidence to become more aware of financial risks and opportunities, to make informed choices, to know where to go for help and to take other effective actions to improve their financial well-being. Financial Literacy Week (FLW) Reserve Bank of India (RBI) has been observing Financial Literacy Week (FLW) every year since 2016 to p...
Post a Comment
Read more

What is Reserve Bank of India – Digital Payments Index (RBI-DPI)? (Updated on February 12, 2026)

There have been continuous efforts by various stakeholders for digitization of payments in the country. But how to we measure the impact of these efforts?  What is Reserve Bank of India – Digital Payments Index (RBI-DPI)? Reserve Bank of India (RBI) has constructed a composite Digital Payments Index (DPI) to capture the extent of digitization of payments across the country. What are the parameters of RBI-DPI? The RBI-DPI comprises of five broad parameters that enable measurement of deepening and penetration of digital payments in the country over different time periods. These parameters along with their weights in the RBI-DPI are as follows –  Payment Enablers (25%) Payment Infrastructure – Demand-side factors (10%) Payment Infrastructure – Supply-side factors (15%) Payment Performance (45%) Consumer Centricity (5%).  Each of these parameters have sub-parameters which, in turn, consist of various measurable indicators.  What is the base year for RBI-DPI? The RBI-DPI ...
Post a Comment
Read more