The Reserve Bank of India (RBI) has proposed the elimination of the Investment Fluctuation Reserve (IFR), a buffer that banks maintain against fluctuations in bond prices. This change could enable banks to recover ₹40,000 crore to ₹60,000 crore in accumulated reserves, boosting their Tier I capital by up to 20 basis points. Analysts estimate that mark-to-market (MTM) losses for banks could reach ₹15,000 crore to ₹20,000 crore for the quarter ending March 2023. The IFR, which constituted an additional buffer of 2% of outstanding investments, will now be treated as Tier I capital, allowing banks to potentially increase their lending capabilities. The RBI's draft proposal is open for public comments until April 29. This adjustment comes at a time when banks are likely to report MTM losses due to rising yields on government securities, which have increased to 7.04% from 6.59% in recent months.