In March 2026, the Reserve Bank of India (RBI) issued RBI(Commercial Banks – Prudential Norms on Declaration of Dividend and Remittance of Profits) Directions, 2026, governing how commercial banks declare dividends.

• The RBI repealed its 2025 dividend framework, introducing a revised set of prudential norms that will take effect from the financial year 2026-27 (FY 27).

Key Highlights

Dividend Payout: Under the revised rules, the maximum dividend payout for banks incorporated in India is capped at 75% of the Profit After Tax (PAT) for the year.

Capital Based Payout: The dividend declaration which was primarily linked to the overall Capital to Risk-Weighted Assets Ratio (CRAR) and net non-performing assets (NPAs), will now be linked to the bank’s Common Equity Tier 1 (CET-1) ratio.

• Banks with a CET-1 ratio at or below 8% are barred from paying any dividend.