What changed
RBI has issued the Reserve Bank of India (Small Finance Banks - Classification, Valuation, and Operation of Investment Portfolio) Amendment Directions, 2026, effective May 18, 2026, to ease operational constraints in maintaining the Investment Fluctuation Reserve (IFR). The amended rule requires a minimum 2% IFR balance of AFS and FVTPL (including HFT) portfolio, assessed annually based on portfolio values as of the balance sheet date.
What it means for you
This amendment aims to simplify the process of maintaining IFR for Small Finance Banks, reducing operational constraints. It ensures that banks maintain a minimum 2% IFR balance of their AFS and FVTPL (including HFT) portfolio, assessed annually based on balance sheet date values.
What you must do
- Review and update IFR maintenance processes to comply with the amended rules.
- Ensure a minimum 2% IFR balance of AFS and FVTPL (including HFT) portfolio is maintained.
- Assess IFR balance annually based on AFS and FVTPL (including HFT) portfolio values as of the balance sheet date.
Who it affects
Small Finance Banks, Investment Portfolio Managers, Risk Management Teams
What is the new minimum IFR balance requirement?
The minimum IFR balance is 2% of the AFS and FVTPL (including HFT) portfolio.
How often must the IFR balance be assessed?
The IFR balance must be assessed annually based on AFS and FVTPL (including HFT) portfolio values as of the balance sheet date.