The Reserve Bank of India (RBI) has issued the draft “Urban Co-operative Banks – Prudential Norms on Declaration of Dividends) Directions, 2025” for public consultation.
The draft aims to strengthen prudential governance and safeguard depositors’ interests in the cooperative banking sector.
Once finalized, these directions will apply to all primary co-operative banks classified as Urban Co-operative Banks (UCBs).
Under the draft, a UCB can declare dividends only if it meets regulatory capital requirements, maintains a net non-performing asset (NNPA) ratio below 5%, complies with Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) norms, and makes all required provisions for NPAs, investments, and other assets. Dividend payments must come solely from the net profits of the financial year, after adjusting for accumulated losses and statutory provisions.
Banks with NNPA ratios up to 10% may seek prior approval from the RBI before declaring dividends. Boards of UCBs are required to consider current and projected capital positions, adequacy of provisions, economic conditions, and profitability outlook while deciding on dividend distribution.
The draft also repeals earlier RBI guidelines on dividend declaration, although actions taken under previous directives will continue to remain valid.
The directions come into immediate effect upon issuance, though comments from the public and stakeholders are invited before finalization.