Reserve Bank of India (Commercial Banks – Prudential Norms on Declaration of Dividend and Remittances of Profits) Directions, 2026

1. Half of bad loans

Adjusted profit is the year's profit after tax minus 50 per cent of net bad loans.

2. Preference dividend excluded

Dividend here covers equity and interim dividend, never dividend on perpetual preference shares.

3. Start date

These Directions take effect from the financial year 2026-27.

4. Who is covered

These rules bind every commercial bank, the State Bank of India, and foreign bank branches in India.

5. Four kinds excluded

Small finance, local area, payments and regional rural banks are outside these rules.

1. No restriction in force

A bank under an explicit dividend restriction from any authority may not pay.

2. The 75 per cent cap

Whatever the bucket allows, total dividend cannot exceed 75 per cent of profit after tax.

BankPulse example. A bank's profit after tax for the year is 800 crore rupees. Whatever the rules otherwise allow, the total dividend cannot exceed 75 per cent of that. That is 600 crore rupees.

3. Windfalls stay home

Exceptional or extraordinary income cannot fund a dividend or a remittance.

4. Overstated profit barred

Profit overstated under a modified audit opinion cannot be paid out, to that extent.

5. Level 3 gains barred

Unrealised gains from fair valuing Level 3 instruments cannot be paid out.

6. A fortnight to report

Details go to RBI's Department of Supervision within a fortnight of declaring or remitting.

7. What the Board weighs

The Board must weigh RBI's divergence findings, the auditor's opinion, capital position and growth plans.

8. Auditor's opinion counts

The Board must consider the auditor's report, including any modified opinion or emphasis of matter.

9. Capital before and after

The bank must meet its capital requirement last year, this year, and after paying the dividend.

10. Profit must be positive

An Indian bank needs positive adjusted profit after tax for the dividend period.

11. Excess must return

If a branch remits too much, the head office must return the excess at once.

12. Capital plans ahead

Current and projected capital position against the requirement is part of the deliberation.

13. Foreign profit positive

A foreign branch needs positive profit after tax for the period it remits.

14. Below eight, nothing

In the bottom bucket, at 8 plus the buffer or below, nothing may be paid.

15. Above twenty, everything

Above 20 plus the buffer the bank may pay 100 of adjusted profit, before the cap.

16. What z means

z is the bank's D-SIB buffer, and zero for a bank that is not one.

17. Foreign branch remittance

A qualifying foreign branch may remit its Indian profit to head office without RBI's prior approval.

18. Audited accounts first

Remittance without prior approval needs the branch accounts audited.

19. Provision reversals guided

Payouts from reversed provisions follow the credit risk transfer Directions.

20. RBI may restrict

RBI may restrict dividends where a bank breaks laws or its guidelines.

21. No special favour

A bank that fails the tests gets no special dispensation for that period.

22. Breach draws action

Breaking these Directions can bring supervisory or enforcement action.

1. Old actions stay valid

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