RBI Proposes Revised Dividend Norms Allowing Higher Bank Payouts Linked to Capital Ratios

The Reserve Bank of India (RBI) has proposed revising dividend distribution norms for banks, allowing payouts up to 75% of net profit, linked to Common Equity Tier 1 (CET1) capital ratios and adjusted profits. This formula-based approach replaces discretionary limits, potentially enabling state-run and private banks to increase dividends significantly. While banks must meet prudential conditions, the government, as a major shareholder in public sector banks, may receive higher dividend income amid strong recent profitability. The draft guidelines are open for feedback until February 5.