Reserve Bank of India consults on draft changes to Investment Fluctuation Reserve requirements including balance sheet date compliance and exemptions

The Reserve Bank of India has published draft Amendment Directions to revise how banks maintain the Investment Fluctuation Reserve (IFR) under its investment portfolio framework and related prudential and disclosure requirements. The proposals would dispense with the IFR requirement for bank categories that maintain a capital charge for market risk and follow the revised norms on classification, valuation and operation of the investment portfolio, and would otherwise move IFR compliance from a continuous requirement to a requirement measured as at balance sheet dates. The draft package spans IFR-related amendments for commercial banks, small finance banks, payments banks, local area banks, urban co-operative banks, rural co-operative banks and regional rural banks, along with linked amendments to the commercial banks capital adequacy directions and to financial statements presentation and disclosure directions for commercial banks and local area banks. The review reflects operational challenges for banks in maintaining IFR above the regulatory threshold on a continuous basis, and seeks to harmonise IFR instructions across bank categories to remove inconsistencies and improve regulatory clarity. Comments are invited from banks and other stakeholders until 29 April 2026 through the Reserve Bank’s ‘Connect 2 Regulate’ channel.