Voluntary Retention Route – Imparting predictability and increasing ease of doing business

RESERVE BANK OF INDIA www.rbi.org.in RBI/2025-26/205 A.P. (DIR Series) Circular No. 21 February 06, 2026 To All Authorised Dealer Category-I banks Madam / Sir, Voluntary Retention Route – Imparting predictability and increasing ease of doing business Please refer to Paragraph 15 of the Statement on Developmental and Regulatory Policies announced as a part of the Bi-monthly Monetary Policy Statement for 2025- 26 dated February 06, 2026, on the Voluntary Retention Route (VRR) for FPI investments in debt instruments. Attention of Authorised Dealer Category-I (AD Category-I) banks is invited to Schedule 1 to the Foreign Exchange Management (Debt Instruments) Regulations, 2019 notified, vide Notification No. FEMA. 396/2019- RB dated October 17, 2019 and the Master Direction - Reserve Bank of India (Non- resident Investment in Debt Instruments) Directions, 2025 dated January 07, 2025 (hereinafter “Master Direction”), as amended from time to time. 2. On a review, it has been decided to make the following changes to the regulatory framework governing investments under the VRR: a) The investment limits under the VRR shall be subsumed under the investment limit for FPI investments under the General Route. Accordingly, all investments through VRR in Central Government securities (including Treasury Bills), State Government Securities and corporate debt securities shall be reckoned under the investment limit for the respective securities under the General Route; and b) FPIs that have availed retention periods longer than the minimum retention period stipulated in the Directions shall have the option of liquidating their portfolio, fully or partly, and exiting the VRR after the end of the minimum retention period. िव�ीय बाज़ार िविनयमन िवभाग,केंद्रीय कायार्लय भवन, नौवी ंमंिजल, शहीद भगत िसंह मागर्, फोटर्, मुंबई–400001.भारत फोन: (91-22) 2260 1000, ई-मेल: cgmfmrd@rbi.org.in Financial Markets Regulation Department, Central Office Building, 9th Floor, Shahid Bhagat Singh Marg, Fort, Mumbai – 400001. India Tel: (91-22) 2260 1000, e-mail- cgmfmrd@rbi.org.in िह�ी आसान है, इसका प्रयोग बढ़ाइए3. These Directions shall come into force with effect from April 01, 2026. All existing investments under VRR on April 01, 2026, shall be transferred to the respective investment limits under the General Route. The amendments being made to the Master Direction are placed at Annex herewith. 4. AD Category – I banks may bring the contents of this circular to the notice of their constituents and customers concerned. 5. The Directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/approval, if any, required under any other law. Yours faithfully, (Dimple Bhandia) Chief General Manager 2Annex Sr. No Existing Directions Revised/Additional Directions In paragraph 4.2 of Part – 2, under the section ‘Note’, after the existing clause (d), a new clause (e) shall be inserted. (i) - (e) Investments in Central Government securities (including Treasury Bills), State Government Securities and corporate debt securities through the Voluntary Retention Route shall be reckoned under the investment limit for Central Government securities (including Treasury Bills), State Government Securities and corporate debt securities respectively under the General Route. In paragraph 5.3 of Part – 3, the existing words shall be substituted, and its existing foot note no. 5 shall be omitted. (ii) ₹2,50,000 crore5 or higher, as Investments under VRR shall be may be notified by the Reserve subject to the investment limit Bank. The investment limit stipulated for FPI investments under may be released in one or the General Route as specified in more tranches. paragraph 4.2 of these Directions. Footnote: 5Any investment limit allotted under VRR-Govt. or VRR-Corp. in terms of the Directions issued under A.P. (DIR Series) Circular No. 21 dated March 01, 2019, shall be deemed as investment limit iSr. No Existing Directions Revised/Additional Directions under the overall limit in terms of para 5.3 of the Directions. In Part – 3, after the existing clause (ii) in paragraph 5.5 the following new clause (iii) shall be inserted, namely: - (iii) - (iii) An FPI that had availed investment limit for a retention period exceeding the minimum retention period stipulated in terms of paragraph 5.3(ii) of these Directions may opt to liquidate its portfolio fully or partly and exit after the end of the said minimum retention period. ii