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Informist, Tuesday, Mar. 10, 2026

--RBI issues final norms on dividend, remittance of profit 

--RBI: Final norms on dividend, remittance of profit effective from FY27 

NEW DELHI – The Reserve Bank of India on Tuesday issued final norms for the declaration of dividends by banks and remittance of profits by foreign banks operating in branch mode in India. The central bank issued norms on board oversight, eligibility criteria, and the amount of dividends payable after accepting some feedback on its draft norms.

The central bank has set the formula for calculating dividend payout limits and capped it at 75% of net profit for commercial banks, small finance banks, and payments banks. However, the cap on dividend payouts for regional rural banks and local area banks has been set at 80% of net profit. RBI had sought feedback on the draft norms on Jan. 6. The final norms will take effect from 2026-27 (Apr-Mar), the central bank said. 

As per the final norms, the dividend limit will be calculated based on the total capital adequacy, including the graded level of the Common Equity Tier 1 ratio and the 'D-SIB (domestic systemically important banks) buffer'. The Domestic Systemically Important Bank buffer is an additional layer of capital that large, critical banks must hold, making them more resilient to economic shocks.

According to the central bank, the bank board should consider the divergence in classification and provisioning for non-performing assets, including its trend, before declaring dividends. Other aspects to keep in mind include the auditors' report on the financial statements, the current and projected capital position, capital requirements, and long-term growth plans.

The central bank said that 50% of net non-performing assets must be deducted from net profit, instead of the 100% proposed earlier, to arrive at the adjusted profit for dividend calculation. "Deduction of 100% net NPA from net profit assumes zero % recovery, which may be too conservative," the central bank said. "Further, deducting net NPA from CET1 (Common Equity Tier 1) would defeat the purpose of linking dividend eligibility to asset quality," it said. 

RBI said that in case the net profit for the relevant period includes any exceptional or extraordinary profits or income, or if the financial statements are qualified by the statutory auditor that indicates an overstatement of net profit, it will be reduced from net profit while determining the dividend payout ratio. The dividend payout ratio is the ratio between the amount of the dividend payable in a year and the net profit as per the audited financial statements for the financial year for which the dividend is proposed.

As per the circular issued on Tuesday, a foreign bank operating in India in branch mode may remit the net profit or surplus for a quarter or year, earned in the normal course of business from its Indian operations, without prior RBI approval. This is provided that the bank's accounts are audited, and in the event of an excess remittance, the head office of the foreign bank immediately makes good the shortfall.

Banks declaring dividends or remitting profits to the head office will report the details to the RBI's Department of Supervision within a fortnight of the declaration or remittance. Additionally, banks should pay dividends only on equity shares, according to the circular.  End

Reported by Priyasmita Dutta

Edited by Saji George Titus

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