The Reserve Bank of India has issued the Reserve Bank of India (Local Area Banks – Classification, Valuation, and Operation of Investment Portfolio) Amendment Directions, 2026, with immediate effect, amending the existing 2025 Directions relating to Investment Fluctuation Reserve (IFR). In view of developments in the prudential framework governing market risk and investments for Local Area Banks, RBI has discontinued the requirement of maintaining 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. Further, paragraphs 105 to 107 of the 2025 Directions relating to IFR have been deleted.
