What changed
RBI issues Directions to Regional Rural Banks (RRBs) on prudential norms for dividend declaration, effective FY 2026-27. The Directions outline eligibility criteria, dividend limits based on Tier 1 Capital Ratio and adjusted PAT, and reporting requirements.
What it means for you
The new Directions aim to ensure that RRBs maintain robust capital adequacy and prudent risk management practices before declaring dividends. This will help prevent potential risks to the stability of the banking system.
What you must do
- Review and update dividend declaration policies to align with RBI's new Directions.
- Ensure compliance with eligibility criteria, including regulatory capital requirements and positive adjusted PAT (PAT minus 50% of Net NPA).
- Report dividend declaration to NABARD within a fortnight as per Annex II format.
Who it affects
Regional Rural Banks (RRBs)
What is the effective date of the new Directions?
The new Directions will be effective from Financial Year 2026-27.
What are the eligibility criteria for dividend declaration?
RRBs must meet the following criteria: compliance with regulatory capital requirements, positive adjusted PAT, and no explicit restrictions on dividend declaration.
What is the maximum dividend limit allowed?
The maximum dividend limit is 80% of the PAT for the period, as per Table 1 in the Directions.