RBI caps maximum dividend by banks at 75% of profit after tax
The Reserve Bank of India (RBI) has limited the maximum dividend banks can pay to their shareholders at 75% of profit after tax (PAT). The new norms will come in effect from the financial year (FY) 2026-27. Following the consultations with stakeholders, the RBI has issued the Reserve Bank of India (Commercial Banks - Prudential Norms on Declaration of Dividend and Remittances of Profits) Directions, 2026.
Under these norms, the regulatory capital of the bank should not fall below the applicable regulatory capital requirement even after the payment of dividends. Further, a foreign bank operating in India in branch mode should have positive PAT for the period for which the profits are to be remitted to the Head Office.
The RBI has also issued prudential norms on declaration of dividend for small finance banks, local area banks, payment banks, and regional rural banks. Meanwhile, the combined net profit of all scheduled commercial banks (SCBs) grew 14.8% year-on-year to Rs 4.01 lakh crore during FY25, with the return on assets (RoA) at 1.4% and return on equity (RoE) at 13.5%.
