The Reserve Bank of India (RBI) has issued the draft “Rural Co-operative Banks – Prudential Norms on Declaration of Dividends” Directions, 2025 for public comments. The draft outlines prudential requirements that Rural Co-operative Banks (RCBs), including State and Central Co-operative Banks, must follow before declaring dividends.
Under the draft Directions, an RCB can declare dividends only if it meets certain conditions.
These include compliance with regulatory capital requirements, maintaining a net non-performing asset (NNPA) ratio at or below five per cent, adherence to Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) norms, and making all necessary provisions for impaired assets, taxes, and employee benefits. Dividends must be paid out of net profits for the relevant financial year, after adjusting for accumulated losses, if any.
The Board of Directors of an RCB is required to consider the bank’s current and projected capital position, adequacy of provisions, economic environment, and outlook for profitability while declaring dividends.
The Directions also repeal all earlier instructions and guidelines on dividend declaration for RCBs. However, any actions, approvals, or acknowledgments under previous guidelines shall continue to remain valid. The RBI has clarified that these Directions are in addition to, and not in derogation of, other applicable laws, rules, or regulations.
The draft Directions are open for comments from stakeholders, with the RBI retaining the authority to issue clarifications or interpretations, which will be final and binding.
