The Reserve Bank of India (RBI) on November 28, 2025, issued the Reserve Bank of India (Rural Co-operative Banks – Prudential Norms on Declaration of Dividends) Directions, 2025.
The following has been stated namely: -
• The RBI mandates that any bank or co-operative bank can declare a dividend only after ensuring its capital position is sound and that all statutory provisions (such as writing off capitalised expenses and transferring profits to reserves) are met.
• The dividend be paid only out of the net profit for the current year, and not from past reserves or retained earnings.
• The Board shall assess the bank’s current and projected profitability, asset quality (particularly NPAs) and capital adequacy before recommending a payout.
• Further, the regulator in stressed situations can restrict dividend declaration entirely, emphasising the need for banks to conserve capital rather than distribute profits during uncertainty.
• This shall come into force from November 28, 2025.
[Notification no. - RBI/DOR/2025-26/315 DOR.ACC.REC.234/ 21-02-067/2025-26]
