What changed
The minimum IFR requirement for UCBs is now fixed at 5% of the investment portfolio, computed with reference to the book value of investments in AFS and HFT categories as of the balance sheet date, assessed annually. Previously, the calculation method was different. Additionally, UCBs can now draw down IFR in excess of 5% to credit the P&L at year-end, at their discretion with board approval for higher IFR.
What it means for you
UCBs get clearer, simpler IFR rules: a flat 5% floor on the investment portfolio (computed on AFS+HFT book value) replaces earlier complex computation. This reduces compliance burden and gives flexibility to release excess IFR to profits, improving reported earnings. Banks must still maintain the 5% minimum annually, but can build higher IFR with board nod.
What you must do
- Recalculate IFR as 5% of the investment portfolio, computed with reference to book value of AFS and HFT investments as of balance sheet date, effective immediately.
- Assess IFR adequacy annually; if below 5%, make provisions to meet the minimum.
- If IFR exceeds 5%, consider drawing down the excess to P&L at year-end, subject to board policy.
- Update internal investment portfolio policies to reflect the new IFR computation and drawdown rules.
- Train treasury and compliance teams on the revised IFR norms for accurate reporting.
Who it affects
Urban Co-operative Banks (UCBs), Treasury departments of UCBs, Compliance and risk management teams at UCBs, Auditors of UCBs
What is the new minimum IFR requirement for UCBs?
UCBs must maintain a minimum IFR of 5% of their investment portfolio, computed with reference to the book value of investments in AFS and HFT categories, assessed annually as of the balance sheet date.
Can UCBs use IFR above the minimum to boost profits?
Yes, UCBs may draw down IFR in excess of 5% of their investment in AFS and HFT to credit the profit and loss account at the end of any accounting year, at their discretion.
When do these amended directions take effect?
The amendment directions came into effect from the date of issue, May 18, 2026.