Reserve Bank of India (Non-Banking Financial Companies – Prudential Norms on Declaration of Dividends) Directions, 2025 (Updated as on July 01, 2026)

1. Start date

These Directions took effect immediately upon issuance.

BankPulse example. There is no gap here between issue and effect. The Directions come into effect immediately upon issuance. A bank cannot wait for a separate start date, because there is none.

2. Who is covered

These rules bind registered non-banking financial companies across all layers.

3. Holding companies excluded

A non-operative financial holding company is outside these rules.

4. Interim counts too

Dividend here includes any interim dividend.

5. Payout ratio defined

The payout ratio compares the year's dividend, interim included, with audited net profit.

1. Dealers need twenty

A standalone primary dealer needs 20 per cent CRAR in each quarter of the year.

BankPulse example. A dealer reports 22, 21, 20 and 19 per cent across the four quarters. The last quarter is below 20 per cent, so the test is not met. The minimum of 20 per cent has to hold in every one of the four quarters.

2. Bad loans under six

Net bad loans must stay under six per cent in each of the last three years.

3. The payout ceilings

The payout may not cross 60 for core investment companies and dealers, and 50 for others.

4. The ten per cent door

A company failing the three-year tests may still pay, capped at ten per cent.

5. Four per cent to enter

That door needs current capital compliance and net bad loans under four per cent.

6. Fifteen stops a dealer

A dealer below 15 per cent CRAR in any quarter may pay nothing.

BankPulse example. A dealer falls to 14 per cent in one quarter. It may declare no dividend at all that year. The regulatory minimum is 15 per cent, and one quarter below it is enough.

7. A third at most

With every quarter at or above the minimum but below 20 per cent, payout cannot exceed 33.3 per cent.

BankPulse example. A dealer holds 17 per cent in one quarter and above 15 per cent in the rest. It stays above the minimum but under 20 per cent. So the payout may not exceed 33.3 per cent of profit.

8. A fortnight to report

Dividend details go to RBI's regional supervision office within a fortnight of declaration.

9. What the Board weighs

The Board must weigh divergence findings, auditor qualifications and long term growth plans.

10. Board owns the total

The Board must ensure the year's total dividend stays inside these ceilings.

11. Three clean years

Capital requirements must have been met in each of the last three financial years.

12. Young firms since birth

A younger company must have complied since its registration.

13. The reserve fund first

The statutory reserve fund requirement of the RBI Act must be met.

14. Housing firms, housing law

A housing finance company meets the reserve requirement of the housing bank law instead.

15. Preference shares counted

Proposed dividend counts equity and the convertible preference shares sitting in core capital.

16. Windfalls come out

Exceptional income and any overstated profit are removed before the payout ratio is worked out.

17. Type I uncapped

A Type I company faces no specified payout ceiling.

18. Base layer freed

A base layer company with customer interface and no public funds faces no ceiling.

19. No ad-hoc mercy

RBI and NHB will not entertain requests for ad-hoc dividend dispensation.

20. Provision reversals guided

Payouts from reversed provisions follow the credit risk transfer Directions.

21. Housing firms report NHB

A housing finance company reports its dividend to the National Housing Bank within a fortnight.

22. Dealers report differently

A dealer reports in its own format with the Board resolution, to the debt management department.

1. Old actions stay valid

Action taken under the repealed rules is still governed by those rules.