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On March 10, 2026, the Reserve Bank of India (RBI) issued the Reserve Bank of India (Payment Banks – Prudential Norms on Declaration of Dividend) Directions, 2026, under Section 35A of the Banking Regulation Act, 1949. These directions establish comprehensive prudential requirements governing dividend declarations by payment banks in India. The directions introduce a tiered dividend framework based on Tier 1 capital ratios, permitting payment banks to declare dividends ranging from 0 percent to 100 percent of adjusted Profit After Tax (PAT), depending on their capital position. Dividend eligibility is capped at 75 percent of PAT in aggregate. Payment banks must maintain compliance with applicable regulatory capital requirements both before and after dividend payment, and must demonstrate positive adjusted PAT for the financial year in which dividends are proposed. The RBI has established specific eligibility criteria requiring payment banks to maintain regulatory capital above minimum thresholds and remain free from explicit dividend restrictions. Certain profits are excluded from dividend calculations, including exceptional or extraordinary profits, profits subject to modified audit opinions indicating PAT overstatement, and net unrealised gains from fair valuation of Level 3 financial instruments. Payment banks declaring dividends must report details to the RBI's Department of Supervision within a fortnight of declaration, using prescribed formats. The RBI reserves the right to restrict dividend distribution where banks are found non-compliant with applicable laws and regulations. Non-compliance with these directions may result in supervisory and enforcement action. These directions come into effect from Financial Year 2026-27 and repeal the Reserve Bank of India (Payment Banks – Prudential Norms on Declaration of Dividends) Directions, 2025, issued on November 28, 2025.

On March 10, 2026, the Reserve Bank of India (RBI) issued the Reserve Bank of India (Payment Banks – Prudential Norms on Declaration of Dividend) Directions, 2026 establishing comprehensive prudential requirements governing dividend declarations by payment banks in India. The directions contain provisions governing: Board oversight requiring the board of directors to consider supervisory findings relating to asset classification and provisioning, the auditor’s report, the bank’s current and projected capital position, and long-term growth plans before approving a dividend. Eligibility criteria under which a payments bank may declare dividends only if it meets specified prudential conditions, including compliance with regulatory capital requirements, maintaining capital adequacy even after dividend payment, having positive adjusted profit after tax (PAT), and not being subject to regulatory restrictions on dividend declaration. Dividend payout limits linking the permissible dividend payout is linked to the Tier 1 capital ratio, with higher payout limits allowed for banks with stronger capital positions, subject to an overall cap of 75% of PAT for the relevant period. Restrictions on profits used for dividends specifying that dividends cannot be declared out of e xtraordinary income, overstated profits identified in audit reports, or unrealised gains arising from the fair valuation of certain financial instruments. Reporting requirements mandating that payment banks declaring dividends must submit prescribed details to the Department of Supervision of the RBI within two weeks of the declaration. Regulatory powers enabling the RBI to restrict dividend payments where a bank is non-compliant with applicable laws or regulatory requirements, and non-compliance with the directions may attract supervisory or enforcement action. The directions come into effect from financial year 2026–27 and repeal the earlier Reserve Bank of India (Payments Banks – Prudential Norms on Declaration of Dividends) Directions, 2025.

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Reserve Bank of India Issues Prudential Norms on Payment Banks Dividend Declaration

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Reserve Bank of India Issues Directions on Dividend Declaration for Payment Banks