RBI invites comments on draft rules for dividend distribution by banks – The Times of India

MUMBAI: The Reserve Bank of India (RBI) has sought public comments on the draft ‘Reserve Bank of India (Prudential Norms on Dividend and Remittance of Profit) Directions, 2026’, which proposes a revised framework for declaring dividends and remitting profits by banks.The central bank said it had undertaken a review of existing guidelines regarding prudential norms for dividend declaration and remittance of profits by foreign banks operating through branches in India. Accordingly, a draft of the revised framework was previously published for public comment on January 2, 2024.Based on the feedback from stakeholders and the consultations received subsequently, the RBI has now issued new draft guidelines proposing a new methodology for calculating the maximum eligible dividend payment. These draft guidelines have been placed in the public domain for comment.In an official statement on Tuesday, the central bank said: “Draft guidelines are being issued proposing a new methodology for calculating the maximum eligible dividend distribution for public comment.”The design framework includes five separate sets of prompts. These include the Reserve Bank of India (Commercial Banks – Prudential Norms on Declaration of Dividend and Remittances of Profit) Directions, 2026.Reserve Bank of India (Small Finance Banks – Prudential Norms on Dividend Declaration) Directions, 2026.Reserve Bank of India (Payment Banks – Prudential Standards for Dividend Declaration) Directions, 2026.Reserve Bank of India (Regional Rural Banks – Prudential Norms on Dividend Declaration) Directions, 2026.Reserve Bank of India (Local Area Banks – Prudential Norms on Dividend Declaration) Directions, 2026.According to the draft guidelines for commercial banks, a bank is only eligible to pay dividends or distribute profits if it meets certain prudential requirements. These include compliance with applicable regulatory capital requirements at the end of the previous financial year and continued compliance during the year in which the dividend is proposed.The regulatory capital may not fall below the prescribed requirement even after the dividend distribution.Further, banks incorporated in India must have a positive adjusted profit after tax (PAT) for the period for which the dividend is proposed, while foreign banks operating in branch mode must have a positive PAT for the period for which profits are proposed to be distributed.Similar prudential conditions have been proposed for small finance banks, payment banks, regional rural banks and local banks. These banks must meet statutory capital requirements before and after dividend distribution, have a positively adjusted PAT for the relevant financial year, and there should be no explicit restrictions on dividend declaration by the RBI or any other authority.The RBI said comments on the draft guidelines are invited till February 5, 2026. Stakeholders can submit their comments and feedback through the link available under ‘Connect2Regulate’ section of the Reserve Bank’s website.