The Reserve Bank of India issued the Reserve Bank of India (Regional Rural Banks – Classification, Valuation, and Operation of Investment Portfolio) Amendment Directions, 2026 on May 18, 2026, to address operational difficulties faced by Regional Rural Banks (RRBs) in maintaining the Investment Fluctuation Reserve (IFR). Exercising powers under Section 35A of the Banking Regulation Act, 1949, RBI amended paragraph 104 of the 2025 Directions governing investment portfolios of RRBs. Under the revised provision, RRBs must create IFR from realized gains arising from the sale of investments, subject to the availability of net profit, until the reserve reaches at least 2% of the Held for Trading (HFT) and Available for Sale (AFS) portfolio. The minimum IFR requirement will now be assessed annually with reference to the book value of investments in the AFS and HFT categories as on the balance sheet date. The amendment came into immediate effect and aims to balance prudential reserve requirements with operational practicality for Regional Rural Banks.
Reserve Bank of India
RBI/2026-27/89
DOR.MRG.REC.No.77/00-00-001/2026-27 |Dated: May 18, 2026
Reserve Bank of India (Regional Rural Banks – Classification, Valuation, and Operation of Investment Portfolio) Amendment Directions, 2026
Please refer to paragraph 104 of Reserve Bank of India (Regional Rural 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) 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 (Regional Rural Banks – Classification, Valuation, and Operation of Investment Portfolio) Amendment Directions, 2026.
(ii) These Amendment Directions shall come into effect from the date of issue.
4. The Reserve Bank of India (Regional Rural Banks – Classification, Valuation, and Operation of Investment Portfolio) Directions, 2025, are amended as provided below.
(i) Paragraph 104 shall be substituted by the following, namely: –
“104. An RRB shall create Investment Fluctuation Reserve (IFR) out of the realised gains on sale of investments, subject to the availability of net profit, until the amount of IFR is at least 2 per cent of the HFT and AFS portfolio. This minimum requirement shall be assessed annually and shall be computed with reference to the book value of investments in AFS and HFT categories as of the balance sheet date.”.
(Sunil T S Nair)
Chief General Manager
