Overview
- The proposed framework limits most commercial banks to total dividends of no more than 75% of profit after tax, subject to eligibility and computed limits.
- Regional rural banks and local area banks would face a higher cap of up to 80% of profit after tax under separate draft directions.
- The draft defines dividend as equity payouts including interim dividends while excluding distributions on Perpetual Non-Cumulative Preference Shares.
- Eligibility requires positive adjusted profit after tax and compliance with regulatory capital requirements before and after payout, with foreign bank branches needing positive profit to remit earnings to head offices.
- Bank boards are instructed to weigh long-term growth plans and capital position when considering dividends, and the RBI reserves the right to restrict payouts for non-compliance.