The Reserve Bank of India (RBI) revised the features of investment by Foreign Portfolio Investors (FPIs) in India vide two circulars published on 22 January 2020, namely the circular on FPI investment in debt (FPI Investment Circular) and Voluntary Retention Route' (VRR) for FPIs investment in debt (VRR Circular).

By way of the FPI Investment Circular, the RBI has introduced the following changes in relation to FPI investments in debt:

  • The short term investment limits for FPIs in i) Central Government Securities (including Treasury Bills), ii) State Development Loans and iii) Corporate bonds has been increased from the erstwhile limit of 20% to 30% of the total investment of the FPI in the Central Government Securities (including Treasury Bills) or State Development Loans or Corporate bonds, as the case may be; and
  • Similar to exemptions from short term investment limits afforded to FPI in case of investment in security receipts, the FPI Investment circular has extended the said exemption to FPI investment in debt instruments issued by asset reconstruction companies and debt instruments issued by an entity under the corporate insolvency resolution process as per the resolution plan approved by the National Company Law Tribunal under the Insolvency and Bankruptcy Code, 2016.

By way of the FPI VRR Circular, the RBI has announced the following revisions to the FPI VRR route of investment:

  • The cap on investment under VRR has been increased to INR 1,50,000 crores from INR. 75,000 crores.
  • FPIs that have been allotted investment limits under VRR may, at their discretion, transfer their investments made under the General Investment Limit available to FPI to VRR.
  • The scope of instruments that FPIs can invest in has been expanded under VRR to also include Exchange Traded Funds that invest only in debt instruments.


With this move, the RBI has bolstered its intention to facilitate and encourage investment by Foreign Portfolio Investors in India by allowing further exemptions and by increasing investment limits.

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