FPIs in a bind over RBI's voluntary retention route for distressed debt

Foreign portfolio investors (FPIs) wanting to invest in stressed assets are in a quandary over taking the Reserve Bank of India’s (RBI’s) voluntary retention route (VRR). 

The RBI threw open the VRR to investors last month, aimed at attracting long-term overseas money into the debt market while ensuring operational flexibility to FPIs to manage their investments. 

FPIs typically invest in stressed assets by way of tradeable instruments such as bonds. 

VRR norms mandate that FPIs invest 25 per cent of the committed portfolio size within one month, and the rest within three months from the date of allotment. The minimum