Current · Source: Reserve Bank of India · RBI/2026-27/89 · issued 18 May 2026 · ~1 min read
Quick answerRBI relaxes rules for Regional Rural Banks to maintain Investment Fluctuation Reserve, allowing them to use realised gains from investment sales.
The rule, in the simplest words
Regional Rural Banks can use realised gains from investment sales to create Investment Fluctuation Reserve (IFR)
IFR must be at least 2% of the High Frequency Trading (HFT) and Available for Sale (AFS) portfolio
Net profit availability is a condition for creating IFR
How it plays out — a real example
Rahul, a treasury officer in Indore, is pleased to see that his Regional Rural Bank can now use the realised gains from selling some of their investments to create the Investment Fluctuation Reserve. This will help the bank maintain stability in their portfolio and provide better services to their customers. Rahul will ensure that the bank assesses their IFR requirements annually and meets the minimum requirement of 2% of the HFT and AFS portfolio.
What changed
RBI has amended the Reserve Bank of India (Regional Rural Banks - Classification, Valuation, and Operation of Investment Portfolio) Directions, 2025, to relax the rules for maintaining Investment Fluctuation Reserve (IFR).
What it means for you
This change allows Regional Rural Banks to use realised gains from investment sales to create IFR, subject to availability of net profit, until the IFR amount is at least 2% of the HFT and AFS portfolio.
What is the new rule for maintaining Investment Fluctuation Reserve (IFR)?
An RRB shall create IFR out of realised gains on sale of investments, subject to availability of net profit, until the amount of IFR is at least 2% of the HFT and AFS portfolio.
When does the new rule come into effect?
The new rule comes into effect from the date of issue, which is May 18, 2026.
What is the purpose of the amendment?
The amendment aims to relax the rules for maintaining IFR, allowing Regional Rural Banks to use realised gains from investment sales.
📜 Read the original circular — full text as issued by RBI
RBI/2026-27/89
DOR.MRG.REC.No.77/00-00-001/2026-27
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
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2026-27/89 · issued 18 May 2026. The plain-English explanation above is BankPulse’s own independent summary.
Example: if you are a Compliance officer at a bank this circular applies to (Regional Rural Banks, Investment portfolio managers), your first concrete step on “RBI Amends Regional Rural Banks' Investment Portfolio Rules” is: “Ensure compliance with the amended IFR rules” (RBI issued this 18 May 2026).
Action required: Ensure compliance with the amended IFR rules
Action required: Monitor and assess IFR requirements annually
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
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BankPulse Compliance Evidence Pack — generated 02 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13456&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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