What changed
RBI repealed the Reserve Bank of India (Local Area Banks – Prudential Norms on Declaration of Dividends) Directions, 2025, effective FY 2026-27. The new Reserve Bank of India (Local Area Banks – Prudential Norms on Declaration of Dividends) Directions, 2026, issued on March 10, 2026, replace them from the same financial year. Any actions or approvals under the repealed Directions continue to be governed by the old provisions.
What it means for you
Local Area Banks must now follow the updated 2026 Directions for dividend declarations from FY 2026-27 onwards. The repeal does not invalidate past approvals or actions; all rights, obligations, and penalties under the old rules remain enforceable. Banks should review the new Directions to ensure compliance with any revised prudential norms.
What you must do
- Review the new Reserve Bank of India (Local Area Banks – Prudential Norms on Declaration of Dividends) Directions, 2026 for FY 2026-27.
- Ensure dividend declarations from FY 2026-27 comply with the updated Directions.
- Maintain records of any approvals or acknowledgments granted under the repealed 2025 Directions as they remain valid.
- Update internal policies and board-level procedures to align with the new 2026 Directions.
Who it affects
Local Area Banks (LABs), Board of Directors of LABs, Compliance teams at LABs, RBI supervisory divisions
What is the effective date of the new Directions?
The new Reserve Bank of India (Local Area Banks – Prudential Norms on Declaration of Dividends) Directions, 2026 take effect from Financial Year 2026-27.
Are actions taken under the old 2025 Directions still valid?
Yes, any action, approval, or acknowledgment under the repealed 2025 Directions continues to be governed by those provisions and remains valid.
Do the new Directions change the dividend declaration process for LABs?
The source does not specify the exact changes, but LABs must now follow the 2026 Directions for dividend declarations from FY 2026-27. Banks should review the new text for any updated prudential norms.