The Reserve Bank of India has issued the Reserve Bank of India (Small Finance 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). Considering the operational challenges faced by Small Finance Banks in maintaining IFR, RBI has revised paragraph 103 to provide that banks shall create IFR out of realised gains on sale of investments, subject to availability of net profit, until the IFR balance reaches at least 2% of the AFS and FVTPL (including HFT) investment portfolio. The minimum IFR requirement is to be assessed annually based on the value of the AFS and FVTPL (including HFT) portfolio as on the balance sheet date, and transfers to IFR are required to be
made from net profit after mandatory appropriations.
