Prudential Norms on Declaration of Dividend and Remittance of Profits for Commercial Banks · RBI/2025-26/387

RBI/2025-26/387 DOR.ACC.REC.No.427/21.02.067/2025-26

March 10, 2026

Reserve Bank of India (Commercial Banks – Prudential Norms on Declaration of Dividend and Remittances of Profits) Directions, 2026

Table of Contents

Introduction

Chapter I

• A. Short title and commencement
• B. Applicability
• C. Definitions

Chapter II - Declaration of dividend and remittance of profits

• A. Board oversight
• B. Eligibility criteria
• C. Quantum of dividend payable by banks incorporated in India
• D. Remittance of profits by foreign banks operating in India in branch mode
• E. Profits ineligible for payment of dividend / remittance of profit by foreign banks operating in India in branch mode
• F. Reporting system
• G. Restriction on payment of dividend and remittance of profits
• H. Penal consequences for non-compliance

Chapter III - Repeal and other provisions

• A. Repeal and saving
• B. Application of other laws not barred
• C. Interpretations

Annex I

Annex II

Annex III

Introduction

In exercise of the powers conferred by Section 35A of the Banking Regulation Act (BR Act), 1949, and all other provisions / laws enabling the Reserve Bank of India (‘RBI’) in this regard, RBI being satisfied that it is necessary and expedient in the public interest to do so, hereby, issues the Directions hereinafter specified.

Chapter I

A. Short title and commencement

1. These Directions shall be called the Reserve Bank of India (Commercial Banks – Prudential Norms on Declaration of Dividend and Remittance of Profits) Directions, 2026.

2. These Directions shall come into effect from Financial Year (FY) 2026-27.

B. Applicability

3. These Directions shall be applicable to all banking companies, corresponding new banks and State Bank of India as defined under subsections (c), (da) and (nc) of section 5 of the Banking Regulation Act,1949, and foreign banks operating as branch(es), excluding Small Finance Banks (SFBs), Local Area Banks (LABs), Payments Banks (PBs), and Regional Rural Banks (RRBs), hereinafter collectively referred to as 'banks' and individually as a 'bank'.

C. Definitions

4. In these Directions, unless the context states otherwise, the terms herein shall bear the meanings assigned to them below.

• (1) ‘Adjusted Profit After Tax (PAT)’ means PAT of the financial year for which the dividend is proposed to be paid minus 50 per cent of Net NPA as on March 31 of the financial year for which the dividend is to be paid;
• (2) ‘Dividend’ means dividend payable on equity shares and includes interim dividend but excludes dividend on Perpetual Non-Cumulative Preference Shares (PNCPS);
• (3) ‘Extra-ordinary profit / income’ shall have the same meaning as defined under applicable Accounting Standards; and
• (4) ‘Remittance of profit’ means repatriation of profit by a foreign bank operating in India in branch mode to its Head Office.

5. All other expressions unless defined herein shall have the same meaning as have been assigned to them under the applicable Acts, Rules / Regulations made thereunder, or any statutory modification or re-enactment thereto or as used in commercial parlance, as the case may be.

Chapter II - Declaration of dividend and remittance of profits

A. Board oversight

6. The Board of Directors[^1] while considering the proposal for declaration of dividend or remittance of profit of a bank shall consider the following:

• (1) The divergence in asset classification and provisioning for Non-Performing Assets (NPAs), including its trend, as observed if any, under supervisory findings of the Reserve Bank;
• (2) Auditors’ Report to the financial statements, including modified opinion or Emphasis of Matter, for the financial year for which the dividend is proposed;
• (3) Current and projected capital position vis-à-vis applicable regulatory capital requirement; and
• (4) Long term growth plans.

B. Eligibility criteria

7. A bank shall meet the following prudential requirements, to be eligible to declare dividends or remit profits.

• (1) The bank was in compliance with the applicable regulatory capital requirement as at the end of the previous financial year and shall continue to be in compliance as at the end of the financial year during which the dividend is proposed to be paid.
• (2) The regulatory capital of the bank shall not fall below the applicable regulatory capital requirement even after the payment of dividend.
• (3) The bank incorporated in India shall have positive adjusted Profit After Tax (PAT) for the period for which the dividend is proposed.
• (4) A foreign bank operating in India in the branch mode, shall have positive PAT for the period for which the profits are to be remitted to the Head Office.
• (5) The bank shall not be under any explicit restrictions for declaration of dividends or remittance of profits from the Reserve Bank or any other authority.

C. Quantum of dividend payable by banks incorporated in India

8. A bank incorporated in India which satisfies the eligibility criteria laid down in paragraph 7 above, may declare and pay dividend up to the limits prescribed under Table 1 below, but in aggregate not exceeding 75% of the PAT for the period for which the dividend is being proposed.

Table 1

Note: ‘z’ in Table 1 refers to the respective applicable D-SIB buffer. ‘z’ shall be zero for a bank not classified as D-SIB.

9. The detailed illustrations are given in Annex I.

D. Remittance of profits by foreign banks operating in India in branch mode

10. A foreign bank operating in India in branch mode, that satisfies the eligibility criteria as specified in paragraph 7 above, may remit net profit / surplus (net of tax) earned in the normal course of business arising out of its Indian operations, without prior approval of the Reserve Bank, subject to the conditions that the accounts of the bank are audited and in the event of excess remittance, if any, the Head Office of that foreign bank immediately shall return the excess remittance and make good the shortfall.

E. Profits ineligible for payment of dividend / remittance of profit by foreign banks operating in India in branch mode

11. The following profits shall not be available for payment of dividend / repatriation of profit by foreign banks operating in India in branch mode:

• (1) Any exceptional and / or extra-ordinary profits / income shall not be available for payment of dividend / remittance of profit by foreign banks operating in branch mode in India.
• (2) If the audit report by the statutory auditor contains a modified opinion that indicates an overstatement of the PAT, the same shall not be available for payment of dividend / remittance of profit by foreign banks operating in branch mode in India, to the extent it is included in PAT.
• (3) In terms of Reserve Bank of India (Commercial Banks - Classification, Valuation and Operation of Investment Portfolio) Directions, 2025, a bank shall not pay dividend or repatriate profits out of net unrealised gains arising on fair valuation of Level 3 financial instruments (including derivatives).
• (4) The prudential treatment of reversal of excess provision, dividend payment or remittance of profits by a bank on reversal of such provisions and unrealized profits arising on account of transfer of loans and Security Receipts guaranteed by the Government of India shall be guided by the instructions contained in the Reserve Bank of India (Commercial Banks – Transfer and Distribution of Credit Risk) Directions, 2025.