‘Dividend’ means dividend payable on equity shares and includes interim dividend. The aggregate dividend should not exceed 75 per cent of profit after tax for the period for which the dividend is being proposed, as per the proposal.
Adjusted Profit After Tax (PAT)’ means PAT of the financial year for which the dividend is proposed to be paid minus Net Non-Performing Asset (NPA) as on March 31 of the financial year forNew formula proposed for banks dividend payout which the dividend is to be paid.The bank incorporated in India shall have positive adjusted Profit After Tax (PAT) for the period for which the dividend is proposed.
RBI has proposed various slabs based on Common Equity Tier 1 (CET1) capital ratio for the previous financial year and the dividend which would be allowed as a percentage of profit. As an illustration, it said for a commercial bank with PAT Rs. 17,000 crore, the 75 per cent works out to Rs.12,750 crore. With an adjusted net profit of Rs 10,500 crore and CET 1 ratio of 11.72 per cent, the maximum payable dividend would be 30 per cent or Rs. 3,150, as per its prescribed slab. In this case the maximum eligible dividend as a part of PAT will be 18.52 per cent.
The RBI has invited public comments on the proposals by 5 February. It has also proposed a methodology for dividend payouts for foreign banks, small finance banks. payment banks among others.
The proposed norms would likely come into effect from the financial year 2026-2027. Once the new norms come into effect, the current provision where the dividend payout ratio shall not exceed 40 per cent based on Capital to Risk Weighted Assets Ratio will be repealed.
