RBI Discontinues Investment Fluctuation Reserve Requirement for Banks

The Reserve Bank of India has discontinued the requirement for commercial banks to maintain an Investment Fluctuation Reserve with effect from May 18, according to a notification issued on Monday.

The central bank amended the Reserve Bank of India (Commercial Banks - Classification, Valuation, and Operation of Investment Portfolio) Directions, 2025, citing developments in prudential frameworks governing market risk and investments for commercial banks.

Under the amended directions, the balance in the Investment Fluctuation Reserve as on May 17 must be transferred “below the line” to statutory reserve, general reserve, or the balance of the profit and loss account, RBI said.

For foreign banks operating in India in branch mode, the IFR balance must be transferred directly to statutory reserves kept in Indian books or to remittable surplus retained in Indian books that is not repatriable as long as the bank operates in India.