The Reserve Bank of India (RBI) has introduced significant changes to enhance the flexibility of banks in calculating their capital-to-risk weighted assets ratio (CRAR). Effective immediately, banks can now include quarterly profits in their CRAR calculations without the previous requirement that the incremental provisioning for non-performing assets (NPAs) in any quarter deviate by more than 25% from the average provisioning across all four quarters. RBI Governor Sanjay Malhotra stated that this change would allow banks to improve their capital adequacy ratios. Furthermore, the RBI plans to abolish the Investment Fluctuation Reserve (IFR) requirement for most commercial banks, which was previously maintained as a buffer against investment depreciation. This decision is based on the existing capital held by banks for market risk and updated norms for investment management. The RBI aims to streamline regulations and enhance clarity by revising guidelines for various bank categories. Draft directions regarding these changes will be made available for public consultation shortly.