The Reserve Bank of India has issued the Reserve Bank of India (Regional Rural Banks – Prudential Norms on Declaration of Dividend) Directions, 2026, which will be 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 Regional Rural Banks (RRBs), requiring compliance with regulatory capital requirements, positive Adjusted Profit After Tax (PAT), and absence of regulatory restrictions. While approving dividends, the Board must consider NPA divergence observed by National Bank for Agriculture and Rural Development (NABARD), auditors’ report, capital position, and long-term growth plans. The framework introduces a Tier 1 capital ratio–based dividend payout structure, permitting dividends within specified limits depending on the bank’s capital position, subject to an overall cap of 80% of PAT. The Directions also restrict dividend payment from extraordinary profits, overstated PAT identified by auditors, or certain prudential adjustments, and require reporting of dividend declaration to NABARD’s Department of Supervision within a fortnight, while RBI retains the power to restrict dividend distribution in cases of regulatory non-compliance.
Link – https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13327&Mode=0
