The Reserve Bank of India has issued new prudential norms governing when Regional Rural Banks can declare dividends and how much they can distribute, effective from financial year 2026-27. The framework sets board oversight expectations, eligibility criteria and capital-linked payout limits. Banks must remain compliant with applicable regulatory capital requirements before and after the dividend, have positive “adjusted Profit After Tax” defined as PAT minus 50% of net non-performing assets as at 31 March, and not be under any explicit restriction on dividends from the Reserve Bank or another authority. Maximum dividends are determined by the Tier 1 capital ratio at the end of the previous financial year, increasing from zero when Tier 1 is up to 7% to 100% of adjusted PAT when Tier 1 is above 19%, subject to an overall cap of 80% of PAT for the period. The Directions also exclude extraordinary profits and any portion of PAT overstated under a modified audit opinion from the distributable pool, require reporting to the National Bank for Agriculture and Rural Development’s Department of Supervision within a fortnight of declaration, and reserve the Reserve Bank’s right to restrict dividends and take supervisory or enforcement action for non-compliance.
Reserve Bank of India 2026-03-10
Reserve Bank of India sets Tier 1 based dividend payout limits for regional rural banks from FY 2026-27
The Reserve Bank of India has introduced new prudential norms for Regional Rural Banks' dividend declarations, effective from the financial year 2026-27. The framework includes board oversight, eligibility criteria, and capital-linked payout limits, with dividends capped based on Tier 1 capital ratios. Banks must comply with regulatory capital requirements and report to the National Bank for Agriculture and Rural Development within two weeks of declaration, with the Reserve Bank retaining the right to restrict dividends.