Statement on Developmental and Regulatory Policies - Commercial Banks
Summary
The Reserve Bank of India announced several developmental and regulatory policy measures for commercial banks, including proposals to dispense with Investment Fluctuation Reserve (IFR) requirements and to simplify CRAR computation by removing conditions on quarterly profit inclusion. The RBI also published 64 draft Master Directions consolidating supervisory instructions for public comment, representing a significant rationalization of the supervisory framework.
What changed
The RBI statement announces multiple regulatory changes for commercial banks. First, banks will no longer need to maintain Investment Fluctuation Reserve as an additional buffer given existing mark-to-market and capital charge requirements for market risk. Second, the condition limiting quarterly profit inclusion in CRAR based on NPA provision deviations will be dispensed with. Third, the RBI has consolidated extant supervisory instructions into 64 draft Master Directions covering up to nine functional areas, published for public comments.
Affected banks (excluding Small Finance Banks, Payment Banks, Regional Rural Banks for IFR changes) should prepare for reduced regulatory burden on capital computation and investment buffers. The consolidation of supervisory instructions into 64 Master Directions will require review of compliance frameworks once final directions are issued. Banks should actively participate in the public consultation process to ensure operational challenges are addressed in the final directions.
What to do next
- Monitor for RBI draft directions on CRAR and IFR amendments
- Prepare comments on 64 Master Directions consolidating supervisory instructions
- Review internal capital adequacy and investment fluctuation reserve policies
Archived snapshot
Apr 9, 2026GovPing captured this document from the original source. If the source has since changed or been removed, this is the text as it existed at that time.
Press Releases
| () | |
| Date : Apr 08, 2026 | |
| Statement on Developmental and Regulatory Policies | |
| | This Statement sets out various developmental and regulatory policy measures relating to (i) Regulations; (ii) Supervision; (iii) Payment Systems; and (iv) Financial Markets:
I. Regulations
- Review of guidelines for inclusion of Quarterly Profits in Capital to Risk-weighted Assets Ratio (CRAR) computation – Commercial Banks
As per the extant guidelines, commercial banks (excluding Regional Rural Banks and Local Area Banks) are permitted to include quarterly net profits in the calculation of CRAR provided that the incremental provisions made for Non-Performing Assets (NPAs) at the end of any of the four quarters of the previous financial year, have not deviated more than 25 per cent of the average of the four quarters. On a review, it is proposed to dispense with this condition. The draft amendment directions in this regard will be issued for public comments shortly.
- Review of Guidelines on Investment Fluctuation Reserve (IFR)
Banks currently maintain Investment Fluctuation Reserve (IFR) as an additional buffer against depreciation in the value of their investments, subject to mark-to-market (MTM) requirements. Currently, commercial banks (including Local Area Banks, but excluding Small Finance Banks, Payment Banks and Regional Rural Banks) already maintain capital charge for market risk and also follow revised norms on classification, valuation, and operation of investment portfolio. In consideration of these applicable prudential requirements, it is proposed to dispense with the IFR requirement for such commercial banks. The existing guidelines for other bank categories are also being revised to address the operational challenges encountered by such banks in complying with the regulatory thresholds on IFR and to harmonise instructions across bank categories, thereby enhancing regulatory clarity and consistency. Draft directions in this regard will be issued shortly for public consultation.
- Review of matters placed before the Boards of the Banks
The matters to be placed before the Boards of banks, along with their periodicity, are determined by the Boards themselves, guided by the seven broad themes prescribed by the Reserve Bank of India. Meanwhile, the Reserve Bank has also mandated certain policies and matters to be placed before the Board for approval, review, or information. In an endeavor to enable Boards to utilize its time effectively, and to facilitate a more focused and qualitative engagement on strategy and risk governance, the Reserve Bank has undertaken comprehensive review and rationalization of all such instructions. Draft directions in this regard will be issued shortly for public consultation.
II. Supervision
- Consolidation of Supervisory Instructions
The Reserve Bank has constantly endeavored to refine and strengthen its regulatory and supervisory framework while minimising compliance costs, through periodic evaluation of instructions for their continued relevance. In furtherance of this objective, Reserve Bank had undertaken a comprehensive consolidation exercise of the regulatory instructions, on an ‘as is’ basis, in 2025. The exercise involved consolidation of more than 9000 existing regulatory circular/ guidelines into 238 function-wise Master Directions (MDs), specific to each category of regulated entity. A similar exercise has now been carried out for the supervisory instructions. Accordingly, the drafts of 64 Master Directions consolidating extant supervisory instructions on up to nine functional areas are being published today on RBI website for public comments.
III. Payment Systems
- Simplifying the onboarding process of MSMEs in Trade Receivables Discounting System (TReDS)
With a view to facilitating timely access to working capital for MSMEs, guidelines for Trade Receivables Discounting System (TReDS) were issued in 2014 and subsequently updated in 2018. The scope of TReDS was further expanded in 2023 with the inclusion of insurance companies as the fourth participant. In order to promote ease of doing business for MSMEs and to encourage their greater participation on TReDS, it is proposed to dispense with the requirement of due diligence of MSMEs while onboarding on TReDS platforms. A comprehensive review of other extant instructions has also been undertaken, and draft directions will be issued shortly for public consultation.
IV. Financial Markets
- Development of Term Money Market
An active-term money market, apart from providing an alternative funding avenue to the market participants, also helps in enhancing monetary policy transmission by creating a link between the overnight money market and longer-term interest rates. At present, only banks and standalone primary dealers are eligible to participate in the term money market, with certain prudential limits. With a view to further enhance the depth of participation and liquidity in the term money market segment, it has been decided to (a) expand the participant base in the term money market segment to include non-bank participants viz., AIFIs, NBFCs, including housing finance companies, companies, etc.; and (b) enhance the borrowing limit in the term money market for standalone primary dealers. The revised directions are being issued separately.
(Brij Raj)
Chief General Manager
Press Release: 2026-2027/38 | | This Statement sets out various developmental and regulatory policy measures relating to (i) Regulations; (ii) Supervision; (iii) Payment Systems; and (iv) Financial Markets:
I. Regulations
- Review of guidelines for inclusion of Quarterly Profits in Capital to Risk-weighted Assets Ratio (CRAR) computation – Commercial Banks
As per the extant guidelines, commercial banks (excluding Regional Rural Banks and Local Area Banks) are permitted to include quarterly net profits in the calculation of CRAR provided that the incremental provisions made for Non-Performing Assets (NPAs) at the end of any of the four quarters of the previous financial year, have not deviated more than 25 per cent of the average of the four quarters. On a review, it is proposed to dispense with this condition. The draft amendment directions in this regard will be issued for public comments shortly.
- Review of Guidelines on Investment Fluctuation Reserve (IFR)
Banks currently maintain Investment Fluctuation Reserve (IFR) as an additional buffer against depreciation in the value of their investments, subject to mark-to-market (MTM) requirements. Currently, commercial banks (including Local Area Banks, but excluding Small Finance Banks, Payment Banks and Regional Rural Banks) already maintain capital charge for market risk and also follow revised norms on classification, valuation, and operation of investment portfolio. In consideration of these applicable prudential requirements, it is proposed to dispense with the IFR requirement for such commercial banks. The existing guidelines for other bank categories are also being revised to address the operational challenges encountered by such banks in complying with the regulatory thresholds on IFR and to harmonise instructions across bank categories, thereby enhancing regulatory clarity and consistency. Draft directions in this regard will be issued shortly for public consultation.
- Review of matters placed before the Boards of the Banks
The matters to be placed before the Boards of banks, along with their periodicity, are determined by the Boards themselves, guided by the seven broad themes prescribed by the Reserve Bank of India. Meanwhile, the Reserve Bank has also mandated certain policies and matters to be placed before the Board for approval, review, or information. In an endeavor to enable Boards to utilize its time effectively, and to facilitate a more focused and qualitative engagement on strategy and risk governance, the Reserve Bank has undertaken comprehensive review and rationalization of all such instructions. Draft directions in this regard will be issued shortly for public consultation.
II. Supervision
- Consolidation of Supervisory Instructions
The Reserve Bank has constantly endeavored to refine and strengthen its regulatory and supervisory framework while minimising compliance costs, through periodic evaluation of instructions for their continued relevance. In furtherance of this objective, Reserve Bank had undertaken a comprehensive consolidation exercise of the regulatory instructions, on an ‘as is’ basis, in 2025. The exercise involved consolidation of more than 9000 existing regulatory circular/ guidelines into 238 function-wise Master Directions (MDs), specific to each category of regulated entity. A similar exercise has now been carried out for the supervisory instructions. Accordingly, the drafts of 64 Master Directions consolidating extant supervisory instructions on up to nine functional areas are being published today on RBI website for public comments.
III. Payment Systems
- Simplifying the onboarding process of MSMEs in Trade Receivables Discounting System (TReDS)
With a view to facilitating timely access to working capital for MSMEs, guidelines for Trade Receivables Discounting System (TReDS) were issued in 2014 and subsequently updated in 2018. The scope of TReDS was further expanded in 2023 with the inclusion of insurance companies as the fourth participant. In order to promote ease of doing business for MSMEs and to encourage their greater participation on TReDS, it is proposed to dispense with the requirement of due diligence of MSMEs while onboarding on TReDS platforms. A comprehensive review of other extant instructions has also been undertaken, and draft directions will be issued shortly for public consultation.
IV. Financial Markets
- Development of Term Money Market
An active-term money market, apart from providing an alternative funding avenue to the market participants, also helps in enhancing monetary policy transmission by creating a link between the overnight money market and longer-term interest rates. At present, only banks and standalone primary dealers are eligible to participate in the term money market, with certain prudential limits. With a view to further enhance the depth of participation and liquidity in the term money market segment, it has been decided to (a) expand the participant base in the term money market segment to include non-bank participants viz., AIFIs, NBFCs, including housing finance companies, companies, etc.; and (b) enhance the borrowing limit in the term money market for standalone primary dealers. The revised directions are being issued separately.
(Brij Raj)
Chief General Manager
Press Release: 2026-2027/38 |
| This Statement sets out various developmental and regulatory policy measures relating to (i) Regulations; (ii) Supervision; (iii) Payment Systems; and (iv) Financial Markets:
I. Regulations
- Review of guidelines for inclusion of Quarterly Profits in Capital to Risk-weighted Assets Ratio (CRAR) computation – Commercial Banks
As per the extant guidelines, commercial banks (excluding Regional Rural Banks and Local Area Banks) are permitted to include quarterly net profits in the calculation of CRAR provided that the incremental provisions made for Non-Performing Assets (NPAs) at the end of any of the four quarters of the previous financial year, have not deviated more than 25 per cent of the average of the four quarters. On a review, it is proposed to dispense with this condition. The draft amendment directions in this regard will be issued for public comments shortly.
- Review of Guidelines on Investment Fluctuation Reserve (IFR)
Banks currently maintain Investment Fluctuation Reserve (IFR) as an additional buffer against depreciation in the value of their investments, subject to mark-to-market (MTM) requirements. Currently, commercial banks (including Local Area Banks, but excluding Small Finance Banks, Payment Banks and Regional Rural Banks) already maintain capital charge for market risk and also follow revised norms on classification, valuation, and operation of investment portfolio. In consideration of these applicable prudential requirements, it is proposed to dispense with the IFR requirement for such commercial banks. The existing guidelines for other bank categories are also being revised to address the operational challenges encountered by such banks in complying with the regulatory thresholds on IFR and to harmonise instructions across bank categories, thereby enhancing regulatory clarity and consistency. Draft directions in this regard will be issued shortly for public consultation.
- Review of matters placed before the Boards of the Banks
The matters to be placed before the Boards of banks, along with their periodicity, are determined by the Boards themselves, guided by the seven broad themes prescribed by the Reserve Bank of India. Meanwhile, the Reserve Bank has also mandated certain policies and matters to be placed before the Board for approval, review, or information. In an endeavor to enable Boards to utilize its time effectively, and to facilitate a more focused and qualitative engagement on strategy and risk governance, the Reserve Bank has undertaken comprehensive review and rationalization of all such instructions. Draft directions in this regard will be issued shortly for public consultation.
II. Supervision
- Consolidation of Supervisory Instructions
The Reserve Bank has constantly endeavored to refine and strengthen its regulatory and supervisory framework while minimising compliance costs, through periodic evaluation of instructions for their continued relevance. In furtherance of this objective, Reserve Bank had undertaken a comprehensive consolidation exercise of the regulatory instructions, on an ‘as is’ basis, in 2025. The exercise involved consolidation of more than 9000 existing regulatory circular/ guidelines into 238 function-wise Master Directions (MDs), specific to each category of regulated entity. A similar exercise has now been carried out for the supervisory instructions. Accordingly, the drafts of 64 Master Directions consolidating extant supervisory instructions on up to nine functional areas are being published today on RBI website for public comments.
III. Payment Systems
- Simplifying the onboarding process of MSMEs in Trade Receivables Discounting System (TReDS)
With a view to facilitating timely access to working capital for MSMEs, guidelines for Trade Receivables Discounting System (TReDS) were issued in 2014 and subsequently updated in 2018. The scope of TReDS was further expanded in 2023 with the inclusion of insurance companies as the fourth participant. In order to promote ease of doing business for MSMEs and to encourage their greater participation on TReDS, it is proposed to dispense with the requirement of due diligence of MSMEs while onboarding on TReDS platforms. A comprehensive review of other extant instructions has also been undertaken, and draft directions will be issued shortly for public consultation.
IV. Financial Markets
- Development of Term Money Market
An active-term money market, apart from providing an alternative funding avenue to the market participants, also helps in enhancing monetary policy transmission by creating a link between the overnight money market and longer-term interest rates. At present, only banks and standalone primary dealers are eligible to participate in the term money market, with certain prudential limits. With a view to further enhance the depth of participation and liquidity in the term money market segment, it has been decided to (a) expand the participant base in the term money market segment to include non-bank participants viz., AIFIs, NBFCs, including housing finance companies, companies, etc.; and (b) enhance the borrowing limit in the term money market for standalone primary dealers. The revised directions are being issued separately.
(Brij Raj)
Chief General Manager
Press Release: 2026-2027/38 | |
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