The Reserve Bank of India has issued the Reserve Bank of India (Commercial Banks – Prudential Norms on Declaration of Dividend and Remittance of Profits) Directions, 2026, which will be effective from FY 2026–27. The Directions, issued under Banking Regulation Act, 1949, prescribe prudential norms governing dividend declaration by banks incorporated in India and profit remittance by foreign banks operating in India in branch mode. Banks must satisfy eligibility conditions such as compliance with regulatory capital requirements, positive adjusted Profit After Tax (PAT), and absence of regulatory restrictions, while the Board must consider factors like supervisory divergence in NPAs, auditors’ report, capital position, and long-term growth plans. The Directions also introduce a CET1-based dividend payout framework with caps linked to capital buffers (overall limit of 75% of PAT), restrict distribution from extraordinary profits, unrealised gains, or overstated PAT, and require reporting of dividend/profit remittance to the RBI’s Department of Supervision within a fortnight. The RBI also retains the power to restrict dividend distribution or profit remittance in cases of regulatory non-compliance.
Link – https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13319&Mode=0
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