The Reserve Bank of India has issued draft Amendment Directions, 2026, proposing revisions to the Investment Fluctuation Reserve (IFR) framework for Urban Co-operative Banks (UCBs). The amendment modifies paragraph 153(4) of the 2025 Directions to address operational challenges in maintaining IFR. Under the revised provision, UCBs must maintain a minimum IFR of 5% of their investment portfolio, calculated with reference to the book value of investments classified under Held for Trading (HFT) and Available for Sale (AFS) categories. Importantly, compliance with this requirement will now be assessed annually based on the portfolio as of the balance sheet date, replacing continuous monitoring. Additionally, UCBs are permitted to maintain a higher IFR level depending on portfolio size and composition, subject to Board approval. Issued under Sections 35A and 56 of the Banking Regulation Act, 1949, the amendment aims to balance prudential safeguards with operational flexibility
Reserve Bank of India
RBI/2026-27/
DOR.MRG.REC.No. /00-00-011/2026-27
XX, 2026
Reserve Bank of India (Urban Co-operative Banks – Classification, Valuation, and Operation of Investment Portfolio) Amendment Directions, 2026 – Draft for Comments
Please refer to paragraph 153 of Reserve Bank of India (Urban Co-operative Banks – Classification, Valuation, and Operation of Investment Portfolio) Directions, 2025, dated November 28, 2025, on Investment Fluctuation Reserve (IFR). In view of certain operational constraints being faced by banks in the maintenance of IFR, there is a need to amend the extant instructions.
2. Accordingly, in exercise of the powers conferred by Section 35A of the Banking Regulation Act, 1949 (hereinafter called the Act), read with Section 56 thereof, and all other laws enabling the Reserve Bank in this regard, the Reserve Bank, being satisfied that it is necessary and expedient in the public interest so to do, hereby, issues the Amendment Directions hereinafter specified.
3. (i) These Directions shall be called the Reserve Bank of India (Urban Co-operative Banks – Classification, Valuation, and Operation of Investment Portfolio) Amendment Directions, 2026.
(ii) These Amendment Directions shall come into effect on the day these are placed on the official website of the Reserve Bank.
4. The Reserve Bank of India (Urban Co-operative Banks – Classification, Valuation, and Operation of Investment Portfolio) Directions, 2025, are amended as provided below.
(i) Paragraph 153.(4) shall be substituted by the following, namely: –
“153.(4) A UCB shall maintain minimum IFR of 5 per cent of the investment portfolio. This minimum requirement shall be assessed annually and shall be computed with reference to the book value of investments in HFT and AFS categories as of the balance sheet date. A UCB may, at its discretion, build up a higher percentage of IFR depending on the size and composition of its portfolio, with the approval of its Board.”.
(Sunil T S Nair)
Chief General Manager
