RBI Dividend Norms for Banks: 75% PAT Cap from FY27
Why in the news
The Reserve Bank revised its rules on bank dividends, linking payouts to capital strength and the quality of loan books.
Key facts
- Ceiling: 75% of PAT, effective FY27.
- Eligibility hinges on the CET1 ratio; banks barely above the regulatory floor cannot declare dividends.
- Adjusted PAT = PAT minus 50% of net NPAs as of 31 March.
Payout rule
| Capital position | Allowed dividend |
|---|---|
| CET1 just above minimum | None |
| Strong buffers | Up to 100% of adjusted PAT, still inside the 75% PAT ceiling |
Conditions and bars
- Capital norms must be met even after paying; no RBI restriction should apply.
- Factors weighed: asset classification divergence, auditor remarks, present and projected capital, growth plans.
- Not payable from exceptional income, Level-3 unrealised fair-value gains, or profits hit by audit qualifications.
Foreign banks
- Branch-mode banks may remit profit to head office without prior approval if eligible and audited; excess remittance must be returned.
Exam angle
- Cap: 75% of PAT from FY27.
- Capital metric: CET1.
- Level-3 gains cannot fund dividends.