RBI/DOR/2025-26/315
DOR.ACC.REC.234/21-02-067/2025-26

November 28, 2025

Reserve Bank of India (Rural Co-operative Banks – Prudential Norms on Declaration of Dividends) Directions, 2025

In exercise of the powers conferred by section 35A read with section 56 of the Banking Regulation Act (BR Act), 1949 and all other provisions / laws enabling the Reserve Bank of India (‘RBI’) in this regard, being satisfied that it is necessary and expedient in the public interest so to do, hereby, issues the Directions hereinafter specified.

Chapter I - Preliminary

A. Short title and commencement

1. These Directions shall be called the Reserve Bank of India (Rural Co-operative Banks – Prudential Norms on Declaration of Dividends) Directions, 2025.

2. These Directions shall come into effect immediately upon issuance.

B. Applicability

3. These Directions shall be applicable to Rural Co-operative Banks (hereinafter collectively referred to as 'RCBs' and individually as a 'RCB').

In this context, rural co-operative banks shall mean State Co-operative Banks and Central Co-operative Banks, as defined in the National Bank for Agriculture and Rural Development Act, 1981.

C. Definitions

4. In these Directions, unless the context states otherwise, the terms herein shall bear the meanings assigned to them below.

(i) ‘CRAR’ means Capital to Risk Weighted Assets Ratio calculated in terms of Reserve Bank of India (Rural Co-operative Banks – Prudential Norms on Capital Adequacy) Directions, 2025.

(ii) ‘Dividends’ includes any interim dividend

(iii) ‘Net Non-Performing Asset (NNPA) ratio’ means ratio of NNPA to net advances.

5. All other expressions unless defined herein shall have the same meaning as have been assigned to them under the applicable Acts, rules / regulations made thereunder, or any statutory modification or re-enactment thereto or as used in commercial parlance, as the case may be.

Chapter II - Declaration of dividends by an RCB

6. An RCB may declare dividends provided it fulfils the following conditions:

(i) It shall comply with applicable regulatory capital requirement;

(ii) NNPA ratio shall be equal to or below five per cent for the financial year for which dividend is proposed;

(iii) The bank has complied with Cash Reserve Ratio (CRR) / Statutory Liquidity Ratio (SLR) requirements during the financial year for which dividend is proposed;

(iv) All necessary provisions for impaired assets and also for payment of income tax, provision for employee benefits, etc., have been made; and

(v) Dividend shall be paid out of net profit, of the financial year for which dividend is being paid, after making all statutory provisions and adjustment of accumulated losses, if any, in full.

7. The prudential treatment of reversal of excess provision, dividend payment by a bank on reversal of such provisions and unrealized profits arising on account of transfer of loans and Security Receipts guaranteed by the Government of India shall be guided by the instructions contained in Reserve Bank of India (Rural Co-operative Banks – Transfer and Distribution of Credit Risk) Directions, 2025.

8. While declaring dividend on equity shares, the Board of Directors of an RCB shall inter alia consider the current and projected capital position of the bank vis-à-vis the applicable capital requirements and the adequacy of provisions, taking into account the economic environment and the outlook for profitability.

Chapter III - Repeal and other provisions

A. Repeal and saving

9. With the issue of these Directions, the existing Directions, instructions, and guidelines relating to Prudential Norms on Declaration of Dividend as applicable to Rural Co-operative Banks stand repealed, as communicated vide circular DOR.RRC.REC.302/33-01-010/2025-26 dated November 28, 2025. The Directions, instructions and guidelines repealed prior to the issuance of these Directions shall continue to remain repealed.

10. Notwithstanding such repeal, any action taken or purported to have been taken, or initiated under the repealed Directions, instructions, or guidelines shall continue to be governed by the provisions thereof. All approvals or acknowledgments granted under these repealed lists shall be deemed as governed by these Directions. Further, the repeal of these Directions, instructions, or guidelines shall not in any way prejudicially affect:

(i) any right, obligation or liability acquired, accrued, or incurred thereunder;

(ii) any, penalty, forfeiture, or punishment incurred in respect of any contravention committed thereunder;

(iii) any investigation, legal proceeding, or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture, or punishment as aforesaid; and any such investigation, legal proceedings or remedy may be instituted, continued, or enforced and any such penalty, forfeiture or punishment may be imposed as if those Directions, instructions, or guidelines had not been repealed.

B. Application of other laws not barred

11. The provisions of these Directions shall be in addition to, and not in derogation of the provisions of any other laws, rules, regulations or Directions, for the time being in force.

C. Interpretations

12. For the purpose of giving effect to the provisions of these Directions or in order to remove any difficulties in the application or interpretation of the provisions of these Directions, the Reserve Bank may, if it considers necessary, issue necessary clarifications in respect of any matter covered herein and the interpretation of any provision of these Directions given by the Reserve Bank shall be final and binding.

(Sunil T S Nair)
Chief General Manager