RBI Tightens Dividend Rules for Banks: Boosts Financial Stability, Impacts Payouts

• RBI introduces strict draft rules for bank dividend payments to strengthen financial stability and ensure capital adequacy.
• New rules link dividend distribution directly to a bank's capital adequacy and asset quality, requiring profits to be set aside for uncertainties.
• Applicable to all commercial banks, including SBI and foreign banks; Regional Rural Banks, Small Finance Banks, and Payments Banks are excluded.
• Banks must calculate 'Adjusted Profit After Tax' (PAT minus Net NPA) to be eligible for dividends, effective from FY27.
• Non-compliance means no dividends or profit remittance; RBI can impose restrictions for violations of banking laws or guidelines.

Why It Matters: RBI's new dividend rules aim for safer banking by linking payouts to financial health, ensuring long-term stability.