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FPI Investment Limit Raised By RBI – Free PDF Download

 

FDI VS FPI

  • When investment is made with an intent of obtaining an ownership stake in a foreign country- FDI.
  • In FDI investment is done through transfers of funds, resources, technology etc.
  • When the investment is made in the financial assets of a company in foreign country- FPI.
  • In FPI investment is done through stock, bonds, etc.

INCREASE IN SHORT TERM INVESTMENT

  • According to the current norms,
  • Short-term investments by a foreign portfolio investor (FPI) should not exceed 20% of the  total investment of that FPI in DEBT
  • The short-term investment limit has now been increased from  20% to 30%
  • RBI has also made relaxation in the voluntary retention route (VRR)  for FPI investments in debt.

VOLUNTARY RETENTION ROUTE (VRR)

  • In March 2019, The RBI introduced a separate channel, the ‘Voluntary Retention Route’ ,To enable FPIs to invest in debt markets in India.

HOW IT IS BENEFICIAL TO INVESTORS?

  • Investments through VRR are free of- Macro-prudential and other regulatory prescriptions
  • Applicable to FPI investments in debt markets.

BUT THERE IS ONE CONDITION

  • FPIs should voluntarily commit to retain a required minimum percentage of their investments in India for a particular period.
  • Currently this period is of 3 years.
  • The investment limit under VRR has been increased to ₹1,50,000 crore from the ₹75,000  crore of the earlier scheme, with a minimum  retention period of three years.
  • Investment limits will be available on tap and allotted on a first-come, first-  served basis, the RBI said.

 
 

 

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