RBI Amends Investment Portfolio Norms on Classification and Valuation

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RBI investment portfolio amendment

Press Release no. 2026-2027/284; Dated: 18.05.2026 (banking.bnf)

The Reserve Bank of India (RBI) has issued amendment directions relating to the ‘Classification, Valuation and Operation of Investment Portfolio’ framework. The amendments prescribe revised requirements concerning maintenance of Investment Fluctuation Reserve (IFR) for various categories of regulated entities.

1. Mandatory Investment Fluctuation Reserve for RRBs, SFBs and Payments Banks

Under the amended directions, Regional Rural Banks (RRBs), Small Finance Banks (SFBs) and Payments Banks are required to create an Investment Fluctuation Reserve (IFR) out of realised gains arising from the sale of investments.

The creation of the reserve shall be:

  • Subject to availability of net profit; and
  • Maintained until the IFR balance reaches at least 2% of specified investments.

2. Minimum IFR Requirement of 2% for Specified Investments

The amended framework requires the IFR balance to be maintained at a minimum of 2% of investments classified under:

  • Available for Sale (AFS); and
  • Fair Value Through Profit and Loss (FVTPL), including Held for Trading (HFT) investments.

The requirement is intended to strengthen prudential safeguards and cushion potential volatility in investment portfolios.

3. IFR Requirement for UCBs and RCBs

The RBI has also prescribed a separate minimum IFR requirement for:

  • Urban Co-operative Banks (UCBs); and
  • Rural Co-operative Banks (RCBs)

Such entities shall maintain a minimum Investment Fluctuation Reserve equivalent to 5% of their investment portfolio.

4. Purpose of Investment Fluctuation Reserve

The Investment Fluctuation Reserve acts as a prudential buffer to absorb adverse valuation movements and market volatility affecting investment portfolios.

The reserve framework is intended to strengthen financial resilience and improve risk management practices among regulated entities.

5. Objective of the Amendment Directions

The amendment directions aim to enhance prudential regulation, strengthen investment risk management and improve resilience of financial institutions against fluctuations in market value of investments.

By prescribing minimum IFR requirements, RBI seeks to ensure greater financial stability and sound investment portfolio management across banking institutions.

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied