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Informist, Monday, May 18, 2026

 

--RBI issues amended norms on Investment Fluctuation Reserve 

--RBI discontinues commercial banks' need for investment fluctuation reserve 

 

NEW DELHI – The Reserve Bank of India has discontinued the requirement for banks to maintain an investment fluctuation reserve, effective Monday. "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 requirement after taking note of the operational challenges faced by banks in maintaining the reserve above the regulatory threshold continuously. The RBI had issued draft norms regarding this on Apr. 8 and sought feedback by Sunday.

 

In the feedback, a stakeholder sought clarification whether the transfer of the investment fluctuation reserve balances for a foreign bank operating in branch mode in India will be included in the General Reserve or Balance of Profit & Loss Account. "For a foreign bank operating in India in branch mode, the balance in IFR shall be transferred directly to 'statutory reserves kept in Indian books' or 'remittable surplus retained in Indian books which is not repatriable so long as the bank functions in India'," the central bank said.  End

 

Reported by Priyasmita Dutta

Edited by Rajeev Pai

 

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