A reserve is to be maintained to guard against any possible reversal of interest rate environment on unexpected developments. It is prudent to transfer maximum amount of gains realised on sale of securities to the Investment Fluctuation Reserve (IFR). Banks are free to build IFR up to 10 per cent of the investment portfolio under HFT and AFS with the approval of the Board of Directors. The amount held under IFR arising out of gains on sale of investments will be reckoned for the purpose of TIER –II capital.
