RBI Proposes New Dividend Payout Rules for Banks: Public Feedback Invited

The central bank said it 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.

Based on stakeholder feedback and consultations received thereafter, the 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.

In an official statement on Tuesday, the central bank stated, "draft Directions proposing a new methodology for computing the maximum eligible dividend payout are being issued for public comments."

The draft framework covers five separate sets of Directions. These include the Reserve Bank of India (Commercial Banks - Prudential Norms on Declaration of Dividend and Remittances of Profit) Directions, 2026.

Reserve Bank of India (Small Finance Banks - Prudential Norms on Declaration of Dividend) Directions, 2026.

Reserve Bank of India (Payment Banks - Prudential Norms on Declaration of Dividend) Directions, 2026.

Reserve Bank of India (Regional Rural Banks - Prudential Norms on Declaration of Dividend) Directions, 2026.

Reserve Bank of India (Local Area Banks - Prudential Norms on Declaration of Dividend) Directions, 2026.

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.

The RBI said comments on the draft Directions are invited till February 5, 2026. Stakeholders can submit their comments and feedback through the link available under the 'Connect2Regulate' section on the Reserve Bank's website.

- ANI