From UPSC perspective, the following things are important :
Prelims level : Voluntary Retention Route (VRR), Fully Accessible Route (FAR)
Mains level : Not Much
The Reserve Bank of India (RBI) has introduced a separate channel, namely ‘Fully Accessible Route’ (FAR), to enable non-residents to invest in specified government bonds with effect from April 1.
Fully Accessible Route (FAR)
- The move follows the Union Budget announcement that certain specified categories of government bonds would be opened fully for non-resident investors without any restrictions.
- Under FAR, eligible investors can invest in specified government securities without being subject to any investment ceilings.
- This scheme shall operate along with the two existing routes, viz., the Medium Term Framework (MTF) and the Voluntary Retention Route (VRR).
- This will substantially ease access of non-residents to Indian government securities markets and facilitate inclusion in global bond indices.
- This would facilitate inflow of stable foreign investment in government bonds.
Voluntary Retention Route (VRR)
- RBI had announced a separate scheme called VRR to encourage Foreign Portfolio Investors (FPIs) to undertake long-term investments in Indian debt markets.
- Under this scheme, FPIs have been given greater operational flexibility in terms of instrument choices besides exemptions from certain regulatory requirements.
- The details are as under:
- The aggregate investment limit shall be ₹ 40,000 crores for VRR-Govt and ₹ 35,000 crores for VRR-Corp.
- The minimum retention period shall be three years. During this period, FPIs shall maintain a minimum of 75% of the allocated amount in India.
- Investment limits shall be available on tap for investments and shall be allotted by Clearing Corporation of India Ltd. (CCIL) on ‘first come first served’ basis.