The Reserve Bank of India has issued the Reserve Bank of India (Payment Banks – Prudential Norms on Declaration of Dividend) Directions, 2026, effective from FY 2026–27, under the powers conferred by the Banking Regulation Act, 1949. The Directions prescribe prudential conditions for declaration of dividend by Payment Banks, including requirements such as compliance with regulatory capital norms, positive Adjusted Profit After Tax (PAT), and absence of regulatory restrictions. The Board must consider factors like NPA divergence observed by RBI, auditors’ report, capital position, and long-term growth plans before approving dividends. The framework introduces a Tier 1 capital–based dividend payout structure, permitting dividends up to specified limits depending on the Tier 1 Capital Ratio, subject to an overall cap of 75% of PAT. Further, dividends cannot be paid out of extraordinary profits, overstated PAT identified by auditors, or unrealised gains from Level 3 financial instruments, and banks must report dividend declarations to RBI’s Department of Supervision within a fortnight. RBI also retains the authority to restrict dividend distribution in case of regulatory non-compliance.
Link – https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13321&Mode=0
