Economy - Reports
07-Jan-2026 10:38
RBI invites public comments on draft rules for dividend payout by banks
The Reserve Bank of India (RBI) has invited public comments on the draft "Reserve Bank of India (Prudential Norms on Dividend and Remittance of Profit) Directions, 2026", proposing a revised framework for declaration of dividends and remittance of profits by banks. The central bank had undertaken a review of the existing guidelines on prudential norms governing declaration of dividend and remittance of profits by foreign banks operating in branch mode in India. Accordingly, a draft of the revised framework was earlier issued for public comments on January 2, 2024. RBI has now issued fresh draft Directions proposing a new methodology for computing the maximum eligible dividend payout. These draft Directions have been placed in the public domain for comments.
RBI noted that under the draft Directions for commercial banks, a bank will be eligible to declare dividends or remit profits only if it meets certain prudential requirements. These include compliance with applicable regulatory capital requirements at the end of the previous financial year and continued compliance during the year in which the dividend is proposed. The regulatory capital should not fall below the prescribed requirement even after the dividend payout.
Further, banks incorporated in India must have positive adjusted Profit After Tax (PAT) for the period for which the dividend is proposed, while foreign banks operating in branch mode must have positive PAT for the period for which profits are proposed to be remitted. Similar prudential conditions have been proposed for Small Finance Banks, Payment Banks, Regional Rural Banks and Local Area Banks. These banks must comply with regulatory capital requirements before and after dividend payment, have positive adjusted PAT for the relevant financial year, and should not be under any explicit restriction on dividend declaration from the RBI or any other authority.
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