The Reserve Bank of India (RBI) on March 10, 2026, notified the Reserve Bank of India (Local Area Banks – Prudential Norms on Declaration of Dividend) Directions, 2026.
The following has been stated: -
•The Reserve Bank of India issued the Reserve Bank of India (Local Area Banks – Prudential Norms on Declaration of Dividend) Directions, 2026 under the Banking Regulation Act, 1949.
•The directions will apply to Local Area Banks and come into effect from FY 2026–27.
Banks can declare dividends only if they meet prudential conditions such as capital adequacy compliance and positive adjusted Profit After Tax.
•The dividend payout limit will depend on the bank’s CRAR level, with an overall cap of 80% of Profit After Tax.
•Certain profits like extraordinary income, overstated PAT, or unrealized gains cannot be used for dividend payment, and banks must report dividend details to the RBI.
•These Directions shall come into effect from Financial Year (FY) 2026-27.
The detailed notification is given in the document below.
[Notification No.: RBI/2025-26/389 DOR.ACC.REC.No.430/21.02.067/2025-26]
