Second Amendment Directions, 2026 standardise investment valuation practices for Local Area Banks.
RBI Amends Investment Norms for Local Area Banks
The Reserve Bank of India has issued the Reserve Bank of India (Local Area Banks - Classification, Valuation, and Operation of Investment Portfolio) Second Amendment Directions, 2026, effective September 22, 2026. The amendment revises Chapter IX of the 2025 Directions concerning the fair valuation of investments.
Local Area Banks, which operate in specific regional jurisdictions, are now required to follow uniform valuation standards to prevent discrepancies in financial reporting. The amendment mandates consistent use of market-based pricing and internal review mechanisms.
These updates are particularly relevant for institutions with limited access to active markets. Compliance enhances transparency and strengthens regulatory oversight in a segment vulnerable to asset quality risks.