The Reserve Bank of India has issued the Reserve Bank of India (Commercial Banks – Classification, Valuation, and Operation of Investment Portfolio) Second Amendment Directions, 2026, amending the existing Directions of 2025 with immediate effect. Pursuant to the revised prudential framework governing market risk and investments for commercial banks, RBI has discontinued the requirement of maintaining Investment Fluctuation Reserve (IFR) with effect from May 18, 2026. Accordingly, the balance lying in the IFR as on May 17, 2026 is required to be transferred ‘below the line’ to the Statutory Reserve, General Reserve, or Balance of Profit & Loss Account. In the case of foreign banks operating in India through branch mode, such balance shall be transferred to statutory reserves kept in Indian books or remittable surplus retained in Indian books that remains non-repatriable while the bank continues operations in India. Further, paragraphs 106 to 108 of the 2025 Directions relating
to IFR have been deleted.
