What is VRRIt is a new channel of investment available to FPIs to encourage them to invest in debt markets in India over and above their investments through the regular route.
The objective is to attract long-term and stable FPI investments into debt markets while providing FPIs with operational flexibility to manage their investments.When was this route proposedThis new investment route was proposed by the central bank in October 2018 at a time the rupee was weakening against the dollar very sharply.
There were also talks of a special NRI bond scheme to attract more dollar funds into the economy and stabilise the rupee.How are they different from the regular FPI investmentsGuidelines say that investments through VRR will be free of the macro-prudential and other regulatory prescriptions 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 of their choice.
But the minimum retention period shall be three years, or as decided by RBI.How much money can an FPI invest through this routeInvestments under this route as of now shall be capped at Rs 40,000 crore for government securities and 35,000 crore per annum.
But the limit could be changed from time to time based on macro-prudential considerations and assessment of investment demand.
There will be separate limits for investment in government securities and investment in corporate debt.Are there any other facilities for investors through VRRFPIs investing through this route will be eligible to participate in repos for their cash management, provided that the amount borrowed or lent under repo were not to exceed 10 per cent of the investment under VRR.
They will also be eligible to participate in any currency or interest rate derivative instrument, OTC or exchange-traded instrument to manage their interest rate risk or currency risk.When will this offer be operationalIt will be open from March 11, 2019 until end-April.