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).

Benefits

• 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.

Back2Basics

Voluntary Retention Route (VRR)

1. RBI had announced a separate scheme called VRR to encourage Foreign Portfolio Investors (FPIs) to undertake long-term investments in Indian debt markets.
2. Under this scheme, FPIs have been given greater operational flexibility in terms of instrument choices besides exemptions from certain regulatory requirements.
3. 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.

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