In a notification issued on March 10, the central bank said it has repealed the Reserve Bank of India (Commercial Banks – Prudential Norms on Declaration of Dividends and Remittance of Profit) Directions, 2025, which were originally issued on November 28, 2025.
“The Reserve Bank of India, being satisfied that it is necessary and expedient in the public interest to do so, hereby repeals the Reserve Bank of India (Commercial Banks – Prudential Norms on Declaration of Dividends and Remittance of Profit) Directions, 2025… with effect from Financial Year (FY) 2026–27,” the RBI said.
The repealed framework will be replaced by the Reserve Bank of India (Commercial Banks – Prudential Norms on Declaration of Dividends and Remittance of Profit) Directions, 2026, which will also take effect from FY27.
However, the central bank clarified that actions already taken under the earlier framework will remain valid. Any approvals or acknowledgements granted under the 2025 directions will be treated as governed under the new rules.
The RBI added that the repeal will not affect “any right, obligation or liability acquired, accrued, or incurred” under the previous directions. Similarly, penalties, forfeitures or punishments arising from violations of the repealed framework will continue to remain enforceable.
Investigations, legal proceedings or remedies related to such rights, liabilities or penalties may also continue as if the 2025 directions had not been repealed, the regulator said.
As per Reuters, banks incorporated in India will not be allowed to pay dividends exceeding 75% of their profit after tax under the revised framework. The rules also ease norms for foreign lenders operating in the country, allowing them to remit profits to their parent entities without prior approval from the Reserve Bank of India. However, the RBI clarified that foreign banks cannot include exceptional or one-time gains as part of dividends or profit remittances.
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Why the rules are being replaced
The move follows the RBI’s review of existing prudential norms governing dividend declarations by banks. The central bank had earlier sought to update the framework to reflect changes in the regulatory environment and the evolving structure of India’s banking sector.
In January, the RBI also issued a draft proposal aimed at ensuring dividend payouts do not weaken banks’ capital positions. The proposal linked payouts to key financial indicators such as capital adequacy, profitability and asset quality, reinforcing the need for banks to maintain adequate buffers before distributing profits.
Under the framework, banks are required to meet regulatory capital requirements and report positive profits before declaring dividends. They must also factor in supervisory observations and asset-quality indicators while deciding on payouts.
Taken together, the updated norms aim to ensure that profit distribution remains aligned with banks’ financial health, allowing payouts while safeguarding capital buffers in the banking system.
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