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Informist, Wednesday, Apr. 8, 2026

--RBI releases draft directions on Investment Fluctuation Reserve 

MUMBAI – The Reserve Bank of India Wednesday sought comments on the proposal to remove the Investment Fluctuation Reserve requirement for banks. The central bank has sought comments by Apr. 29.

The central bank has proposed to remove the requirement of Investment Fluctuation Reserve. "A bank shall treat the outstanding balance in the IFR (Investment Fluctuation Reserve) as Tier 1 capital. For this purpose, the balance in the IFR shall be transferred 'below the line' to Statutory Reserve, General Reserve, or Balance of Profit & Loss Account," the RBI said in a notification. 

Banks currently maintain the Investment Fluctuation Reserve as an additional buffer against depreciation in the value of their investments, subject to mark-to-market requirements. Under the current norms, commercial banks--excluding small finance banks, payment banks, and regional rural banks--maintain a capital charge for market risk and follow revised norms on classification, valuation, and operation of investment portfolios.

The RBI decided to do away with the reserve requirement after taking note of the operational challenges faced by banks in maintaining the reserve above the regulatory threshold on a continuous basis.  End

Reported by Shubham Rana

Edited by Rajeev Pai

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