The Reserve Bank of India has issued draft Amendment Directions, 2026, revising the Investment Fluctuation Reserve (IFR) framework for Rural Co-operative Banks (RCBs) due to operational challenges in maintaining existing requirements. Exercising powers under Sections 35A and 56 of the Banking Regulation Act, 1949, the RBI proposes that RCBs must maintain an IFR of at least 5% of their investment portfolio classified under the Current Category. This requirement will be assessed annually based on the book value of such investments as on the balance sheet date. The amendment simplifies the methodology and provides clarity on computation, thereby addressing practical difficulties faced by banks. The revised framework aims to ensure prudent risk management while offering operational flexibility. The directions will come into force upon notification on the RBI website and are currently released in draft form for stakeholder comments.
Reserve Bank of India
RBI/2026-27/
DOR.MRG.REC.No. /00-00-011/2026-27 | Dated: XX, 2026
Reserve Bank of India (Rural Co-operative Banks – Classification, Valuation,
and Operation of Investment Portfolio) Amendment Directions, 2026 – Draft for Comments
Please refer to paragraph 115 of Reserve Bank of India (Rural 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 read with Section 56 of the Banking Regulation Act, 1949 (hereinafter called the Act) 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 (Rural Co-operative Banks – Classification, Valuation, and Operation of Investment Portfolio) Directions, 2025,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 (Rural Co-operative Banks – Classification, Valuation, and Operation of Investment Portfolio) Directions, 2025, are amended as provided below.
(i) Paragraph 115.(1) shall be substituted by the following, namely: –
“115.(1) An RCB shall maintain IFR of not less than 5 per cent of its investment portfolio classified under the Current Category. This minimum requirement shall be assessed annually and shall be computed with reference to the book value of its investments in the Current Category as of the balance sheet date.”.
(Sunil T S Nair)
Chief General Manager
