Reserve Bank of India on Wednesday announced the removal of the Investment Fluctuation Reserve (IFR) requirement for banks, aiming to support capital adequacy and improve balance sheet flexibility.

The IFR was earlier maintained by banks as an additional buffer to guard against potential losses arising from depreciation in the value of investments, particularly those subject to mark-to-market (MTM) norms.

The central bank noted that commercial banks already maintain adequate capital buffers for market risk and adhere to revised norms governing classification, valuation, and operation of their investment portfolios.

The move is expected to ease regulatory requirements for lenders while relying on existing capital frameworks to manage investment-related risks.