The Reserve Bank of India has capped the maximum dividend payout by banks at 75% of profit after tax (PAT), with the new prudential norms set to take effect from the financial year 2026-27.The central bank on Tuesday issued the Reserve Bank of India (Commercial Banks – Prudential Norms on Declaration of Dividend and Remittances of Profits) Directions, 2026, after consultations with stakeholders.Under the new framework, banks will be allowed to declare dividends “up to the limits prescribed… but in aggregate not exceeding 75 per cent of the PAT for the period for which the dividend is being proposed,” the RBI said.The regulator has also stipulated that a bank’s regulatory capital must not fall below the applicable regulatory capital requirement even after payment of dividends.For foreign banks operating in India through the branch mode, the RBI said they must report positive profit after tax for the relevant period before remitting profits to their head offices.The directions also lay down prudential norms governing dividend declaration by small finance banks, local area banks, payments banks and regional rural banks, PTI reported.The revised guidelines will come into force from FY2026-27, forming part of the central bank’s efforts to strengthen capital buffers while allowing banks to distribute profits to shareholders.
