RBI caps bank dividend payouts at up to 75% of profit

The Reserve Bank of India (RBI) has issued a new set of prudential norms limiting dividend payouts by banks to a maximum of 75% of Profit After Tax (PAT) for most banking institutions. The move aims to align profit distribution with capital strength, profitability, and regulatory compliance.

The central bank released the Reserve Bank of India (Commercial Banks – Prudential Norms on Declaration of Dividend and Remittance of Profit) Directions, 2026 on March 10, 2026. The new guidelines will come into effect from FY 2026–27 and replace the earlier directions issued on November 28, 2025.

Key Provisions

• Banks incorporated in India that meet the eligibility criteria can declare dividends up to 75% of their Profit After Tax (PAT) for the relevant period.
• Such banks must also have a positive adjusted PAT for the period in which dividends are proposed.
• Foreign banks operating in India in branch mode must have a positive PAT to remit profits to their head offices.

Applicability to Other Banks

The prudential norms have also been extended to other categories of banks:

• Small Finance Banks and Payments Banks:
  Dividend payouts capped at up to 75% of PAT, subject to regulatory compliance.
• Local Area Banks and Regional Rural Banks:
  Allowed to declare dividends up to 80% of PAT, provided they meet the RBI’s prudential conditions.

Source: DD India