RBI : requests feedback on proposed guidelines for banks’ dividend payments

RBI : The proposed “Reserve Bank of India (Prudential Norms on Dividend and Remittance of Profit) Directions, 2026,” which suggests a revamped framework for banks’ dividend declaration and profit remittance, has been made available for public comment by the Reserve Bank of India (RBI).

The central bank said that it has reviewed the current rules on prudential standards controlling the declaration of dividends and transfer of earnings by foreign banks that operate in India via branches. As a result, on January 2, 2024, a draft of the updated framework was released for public feedback.

The RBI has recently released new draft Directions that propose a new approach for calculating the maximum eligible dividend distribution, based on stakeholder comments and further discussions. The public is now able to comment on these proposed directions.

The central bank said in an official statement on Tuesday that “draft Directions proposing a new methodology for computing the maximum eligible dividend payout are being issued for public comments.”

Five distinct sets of Directions are covered by the proposed framework. Among them are the Reserve Bank of India’s 2026 Directions on Commercial Banks: Prudential Guidelines for Dividend Declaration and Profit Remittances.

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

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

Directions for Regional Rural Banks by the Reserve Bank of India on Prudential Standards for Dividend Declarations, 2026.

Directions for Local Area Banks on Dividend Declarations by the Reserve Bank of India, 2026.

A bank will only be permitted to declare dividends or send earnings under the proposed Directions for Commercial Banks if it satisfies certain prudential standards. These include adhering to the relevant regulatory capital requirements at the conclusion of the preceding fiscal year and maintaining compliance during the proposed dividend year.

Even after the dividend distribution, the regulatory capital shouldn’t drop below the required level.

Additionally, foreign banks operating in branch mode must have positive adjusted Profit After Tax (PAT) for the period for which profits are requested to be remitted, while Indian-incorporated banks must have positive PAT for the period for which the dividend is proposed.

For Small Finance Banks, Payment Banks, Regional Rural Banks, and Local Area Banks, comparable prudential requirements have been suggested. These banks must have a positive adjusted PAT for the relevant fiscal year, meet regulatory capital requirements both before and after dividend payments, and not have any specific restrictions on declaring dividends from the RBI or any other body.

The RBI said that until February 5, 2026, feedback on the draft Directions is welcome. Using the link found in the Reserve Bank’s ‘Connect2Regulate’ section, stakeholders may provide their thoughts and suggestions.