RBI Limits Bank Dividend Payouts at 75% of PAT, New Prudential Norms Effective FY 2026-27

The Reserve Bank of India (RBI) has recently introduced the Reserve Bank of India (Commercial Banks – Prudential Norms on Declaration of Dividend and Remittance of Profit) Directions, 2026. These norms restrict the cap dividend payouts at 75% of the Profit After Tax (PAT).

Effective from Financial Year (FY) 2026-27, these prudential norms will replace the earlier directions released on November 28, 2025. The new framework specifies the reporting requirements and the penal consequences for non-compliance with the norms.

The banks are required to meet several prudential conditions to be able to declare dividends or remit profits. These include compliance with regulatory capital requirements. As per the RBI, the regulatory capital of a bank must not be less than the applicable capital requirements, even after the dividend payout.

Further, the bank should not be restricted by the RBI or any other authority from declaring dividends or remitting profits.

RBI has also said that the institutions must continue to satisfy the capital requirements both before and after the proposed dividend payment and must report the positive adjusted profits for the relevant financial year.

While the limit for the divided payout for small finance banks and payments banks is 75%, the local area banks and regional rural banks (RRBs) can declare the dividend payouts up to 80% of the PAT if they meet the RBI’s prudential conditions.

The directions issued by the central bank specify the type of profits that cannot be used for making the dividend payment or remittance of profits by the overseas banks operating in India through a branch mode.

Apart from this, the RBI also issued other directions expanding norms to other categories of banks as well. These include the Reserve Bank of India (Payment Banks – Prudential Norms on Declaration of Dividend) Directions, 2026, Reserve Bank of India (Local Area Directions, 2026, Reserve Bank of India (Regional Rural Banks – Prudential Norms on Declaration of Dividend) Directions, 2026, and Reserve Bank of India (Small Finance Banks – Prudential Norms on Declaration of Dividend) Directions, 2026.