**Executive Summary**
This circular, issued by the Reserve Bank of India on February 06, 2026, addresses changes to the regulatory framework governing investments under the Voluntary Retention Route (VRR) for Foreign Portfolio Investors (FPIs) in debt instruments. It aims to increase ease of doing business. The new directions come into effect on April 01, 2026, requiring the transfer of existing VRR investments to the General Route limits.
**Key Points / Main Content**
* **VRR Investment Limits:**
* Investment limits under the VRR will be subsumed under the investment limit for FPI investments under the General Route.
* All VRR investments in Central Government, State Government, and corporate debt securities will be reckoned under the investment limit for respective securities under the General Route.
* **FPI Retention Period Options:**
* FPIs that have availed retention periods longer than the minimum stipulated in the Directions have the option to liquidate their portfolio, fully or partly, and exit the VRR after the end of the minimum retention period.
* **Effective Date:**
* These Directions will come into effect from April 01, 2026.
* All existing investments under VRR on April 01, 2026, will be transferred to the General Route limits.
**Impact Analysis**
**Stakeholder: Authorised Dealer Category-I (AD Category-I) banks**
* **Impact:** The regulatory framework governing investments under the VRR has been altered.
* **Action Required:** Banks must bring the contents of this circular to the notice of their constituents and customers.
**Stakeholder: Foreign Portfolio Investors (FPIs)**
* **Impact:** Changes to investment limits and the flexibility to exit the VRR after the minimum retention period.
* **Action Required:** FPIs should understand the new regulations regarding VRR investments and consider whether to liquidate portfolios.
Key Entities Referenced
Voluntary Retention Route (VRR): A route for Foreign Portfolio Investor (FPI) investments in debt instruments, designed to increase predictability and ease of doing business.
Statement on Developmental and Regulatory Policies: A statement announced as part of the Bi-monthly Monetary Policy Statement which includes policies related to the VRR.
Master Direction - Reserve Bank of India (Non-resident Investment in Debt Instruments) Directions, 2025: A set of directions issued by the Reserve Bank of India concerning non-resident investment in debt instruments. It includes details of VRR
Foreign Exchange Management Act, 1999: An act governing foreign exchange in India, under which these directions are issued.
Reserve Bank of India: The central bank of India, responsible for issuing the regulations and directions related to the VRR.
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