India devised the VRR route to attract stable long-term foreign debt flows by exempting VRR investments from certain ‘restrictions’ in return for a lock-in commitment.
The Reserve Bank of India has done away with the Rs 2.5 lakh crore investment limit for debt securities under the voluntary retention route. This step aims to attract stable foreign debt flows. The investments will now follow the general route ceilings. Foreign investors have recently shown a reduced preference for this route. This change is not expected to lead to a significant increase in inflow.
Foreign investors must commit to their debt investments through the VRR route for at least three years.
“Following the inclusion of government bonds in three global indices, the preference for using this window has diminished, and lifting the cap will not lead to a major increase in inflows that would not otherwise occur,” a senior finance ministry official said.
Foreign investors have been net sellers of Rs 9 billion of debt in the current fiscal, after buying Rs 67 billion in the previous fiscal and selling net Rs 30 billion in 2023-24, deposit data showed.
#RBI #lifts #limit #investments #foreign #bonds #lockin #route