Reserve Bank of India (Local Area Banks - Classification, Valuation, and Operation of Investment Portfolio) Amendment Directions, 2026
RBI notification RBI/2026-27/86 · 18 May 2026
RBI notification RBI/2026-27/86 · 18 May 2026
Summary
Check the official recordThe Reserve Bank of India discontinues the requirement for an Investment Fluctuation Reserve for Local Area Banks. This change takes effect on May 18, 2026. Local Area Banks must transfer the balance of their Investment Fluctuation Reserve as of May 17, 2026, to their Statutory Reserve, General Reserve, or Balance of Profit & Loss Account. The Reserve Bank of India deletes paragraphs 105 to 107 from the original directions.
What you must do
Key dates
Who is affected
RBI/2026-27/86 DOR.MRG.REC.No.74/00-00-001/2026-27 May 18, 2026
Reserve Bank of India (Local Area Banks - Classification, Valuation, and Operation of Investment Portfolio) Amendment Directions, 2026
Please refer to paragraph 104 of Reserve Bank of India (Local Area Banks - Classification, Valuation, and Operation of Investment Portfolio) Directions, 2025, dated November 28, 2025, on Investment Fluctuation Reserve (IFR). In view of the developments in the prudential frameworks governing market risk and investments for Local Area Banks, there is a need to amend the extant instructions.
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.
(i) These Directions shall be called the Reserve Bank of India (Local Area Banks – Classification, Valuation, and Operation of Investment Portfolio) Amendment Directions, 2026.
(ii) These Amendment Directions shall come into effect from the date of issue.
(i) Paragraph 104 shall be substituted by the following, namely: -
"104. The requirement of Investment Fluctuation Reserve (IFR) has been discontinued w.e.f. May 18, 2026. The balance in the IFR as on May 17, 2026, shall be transferred 'below the line' to Statutory Reserve, General Reserve, or Balance of Profit & Loss Account.".
(ii) Paragraphs 105 to 107 shall be deleted.
(Sunil T S Nair) Chief General Manager