RBI eases norms for FPI special window.

MUMBAI: India’s central bank on Friday eased norms for foreign portfolio investors (FPI) buying debt assets under a special window amid expectations that overseas funds would increase allocations to Mumbai after the ruling combine’s return to power with a bigger majority. 

The Reserve Bank of India (RBI) removed a mandatory investment cap, exempting investors from bringing in at least a fourth of the limits purchased through the Voluntary Retention Route (VRR) within one month. 

“The requirement to invest at least 25% of the Committed Portfolio Size within one month of allotment has been removed,” RBI said Friday, a day after the ruling party won a stronger mandate to run the federal government for the next five years. 

VRR was recommended in October 2018 to bring in long-term funds into debt assets. The move was expected to shield the rupee against a strengthening dollar. 

VRR offers higher operational flexibility against the commitment of a minimum holding period and is seen as mitigating the risk of rupee volatility. 

“Doing away with the requirement of investing 25% of the purchased limit within a month provides more leeway for FPIs," said Tejesh Chitlangi, partner, IC Universal Legal. "Investment deals sometime take longer than expected due to numerous issues.” 

The central bank also introduced a separate category - VRR-Combined. 

FPIs that were allotted investment limits under the ‘tap’ open period until April 30 can convert their full allotment to VRR-Combined, RBI said. 

RBI provided FPIs with an additional option at the end of the retention period with investors continuing to hold their investment until the date of maturity or the date of sale, whichever is earlier. 

At the time of introduction, an FPI had to invest a fourth of its limit bought under VRR in the first month and the rest in three months. A few months ago, some FPIs sought clarification on whether they could bring in 25% of allocations in the first month and stagger the remaining amount over a longer period, ET reported on March 11.