Reserve Bank of India (RBI) caps bank dividend payouts at 75% of Profit After Tax (PAT)

Key facts

• The Reserve Bank of India (RBI) issued revised prudential norms for dividend declaration and profit remittance, effective from Financial Year (FY) 2026-27.
• The revised framework applies to commercial banks, Small Finance Banks (SFBs), Payment Banks (PBs), Local Area Banks (LABs), and Regional Rural Banks (RRBs).
• The RBI has capped the dividend payout ratio at 75% of the Profit After Tax (PAT) for the relevant financial year.
• A new metric called Adjusted PAT has been introduced, calculated by deducting 50% of a bank's net Non-Performing Assets (NPAs) from the PAT as of March 31.
• Dividend eligibility is linked to capital adequacy levels, specifically the Common Equity Tier-1 (CET1) ratio for commercial banks.
• Banks must report dividend declaration details to the Department of Supervision of the RBI within a fortnight of the declaration.
• Distributable profits exclude exceptional income, unrealised gains from Level-3 financial instruments, and profits affected by modified audit opinions.