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‘Voluntary Retention Route’ is often seen in news in relation to:
- a)Investments by Foreign Portfolio Investors
- b)Crowding out of Public investments
- c)Disbursal of loans to MSMEs
- d)Tax deduction at source
Correct answer is option 'A'. Can you explain this answer?
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‘Voluntary Retention Route’ is often seen in news in relation to:a)In...
Voluntary Retention Route in relation to Investments by Foreign Portfolio Investors:
Investments by Foreign Portfolio Investors (FPIs) refer to the investment in the financial markets of a country by foreign individuals or institutions. The Voluntary Retention Route (VRR) is a scheme introduced by the Reserve Bank of India (RBI) to encourage long-term investment by FPIs in debt instruments in India.
Key Points:
- The VRR scheme allows FPIs to invest in debt instruments like government securities, treasury bills, corporate bonds, etc., within a specified limit without being subject to any minimum residual maturity requirement.
- FPIs opting for the VRR are required to voluntarily commit to retain a minimum of 75% of their investments for a period of three years. This helps in stabilizing the foreign inflows and reducing the volatility in the debt market.
- The scheme provides operational flexibility to the FPIs as they can freely invest and divest their funds within the specified limit without being subject to any lock-in period.
- FPIs participating in the VRR route are exempt from any minimum residual maturity requirements, concentration limits, and caps on the FPI investment in a single issue of corporate bonds.
- The VRR scheme aims to attract stable and long-term investments from FPIs, thereby reducing the dependency on short-term foreign capital inflows.
In conclusion, the Voluntary Retention Route (VRR) in relation to investments by Foreign Portfolio Investors (FPIs) is a scheme introduced by the RBI to encourage long-term investment in debt instruments in India, providing operational flexibility and stability to the foreign investors.
Investments by Foreign Portfolio Investors (FPIs) refer to the investment in the financial markets of a country by foreign individuals or institutions. The Voluntary Retention Route (VRR) is a scheme introduced by the Reserve Bank of India (RBI) to encourage long-term investment by FPIs in debt instruments in India.
Key Points:
- The VRR scheme allows FPIs to invest in debt instruments like government securities, treasury bills, corporate bonds, etc., within a specified limit without being subject to any minimum residual maturity requirement.
- FPIs opting for the VRR are required to voluntarily commit to retain a minimum of 75% of their investments for a period of three years. This helps in stabilizing the foreign inflows and reducing the volatility in the debt market.
- The scheme provides operational flexibility to the FPIs as they can freely invest and divest their funds within the specified limit without being subject to any lock-in period.
- FPIs participating in the VRR route are exempt from any minimum residual maturity requirements, concentration limits, and caps on the FPI investment in a single issue of corporate bonds.
- The VRR scheme aims to attract stable and long-term investments from FPIs, thereby reducing the dependency on short-term foreign capital inflows.
In conclusion, the Voluntary Retention Route (VRR) in relation to investments by Foreign Portfolio Investors (FPIs) is a scheme introduced by the RBI to encourage long-term investment in debt instruments in India, providing operational flexibility and stability to the foreign investors.
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‘Voluntary Retention Route’ is often seen in news in relation to:a)In...
Option a is correct: Voluntary Retention Route (VRR) is a new channel of investment available to Foreign Portfolio Investors(FPI) for investing in debt markets in India, over and above their investments through the regular route. Introduced in March 2019, its objective is to attract long-term and stable FPI investments into debt markets.
Investments through VRR are free of the macro-prudential and other regulatory prescriptions applicable to FPI investments in debt markets. The condition is that FPIs voluntarily commit to retain a required minimum percentage of their investments in India for a particular period.
The investment limit under VRR is ^1,50,000 crore with a minimum retention period of three years.
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‘Voluntary Retention Route’ is often seen in news in relation to:a)Investments by Foreign Portfolio Investorsb)Crowding out of Public investmentsc)Disbursal of loans to MSMEsd)Tax deduction at sourceCorrect answer is option 'A'. Can you explain this answer?
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