RBI Revamps Dividend Declaration Norms for Banks

The RBI introduced revised guidelines on banks' dividend declarations, easing the deduction of net NPAs from profit calculations. The modifications will be effective from FY 2026-27, following stakeholder feedback. Despite requests to defer until the Expected Credit Loss framework's rollout, the RBI maintained the original timeline.

The Reserve Bank of India (RBI) has unveiled revised guidelines for banks concerning dividend declarations, effective from the financial year 2026-27, following stakeholder input.

Key changes include easing the method of calculating 'Adjusted Profit After Tax' by requiring only 50% of net non-performing assets (NPAs) to be deducted, as opposed to the initially proposed 100%. This adjustment acknowledges the overly conservative nature of full NPA deductions, assuming zero recovery.

The RBI has also clarified that the same prudential criteria applicable to regular dividends will apply to interim dividends. Despite some stakeholders’ requests to delay the guidelines until the Expected Credit Loss framework's implementation, the RBI upheld the original timeline.