Archive · 2 Jun 2025
RBI Considers Stricter Dividend Rules and Easing AIF Investment Norms
The Reserve Bank of India (RBI) is planning to change how banks can give out dividends, potentially making the rules stricter.
They are also considering loosening rules for banks and financial companies that want to invest in other types of funds called AIFs.
This change could help provide money to new businesses and projects.
The RBI is also looking for feedback to see what changes would be best, with stakeholders wanting banks to prioritize growing their capital.
One suggestion is for banks to use their profit as a benchmark.
If these plans go through, it could help new businesses and give banks more room to invest, while also making sure the financial system stays strong.
RBI is considering stricter rules for banks' dividend distribution after stakeholder feedback.
Proposed changes include using Return on Assets (RoA) and Non-Performing Assets (NPAs) as benchmarks.
The RBI proposes easing investment norms for banks and NBFCs in Alternative Investment Funds (AIFs).
Under the draft, a single regulated entity may hold up to 10% of an AIF’s corpus, and all REs combined may hold up to 15%.
Gopal Srinivasan recommends raising the AIF cap for regulated entities to 25%.
- Who
- Reserve Bank of India (RBI)
- What
- Revised dividend framework for banks and eased investment rules for AIFs.
- When
- Final guidelines expected soon; Draft directions open for comment until June 8, 2025.
- Where
- India (RBI)
- Why
- To ensure long-term value creation, financial resilience, and encourage capital flow into high-growth sectors.
- Proposed Dividend Changes
- Stricter norms, potentially using RoA and NPA bands for eligibility
- AIF Investment Proposal
- Easing of investment rules for banks and NBFCs
- AIF Corpus Limits
- Single RE: up to 10%; All REs: up to 15%; No restrictions for up to 5%
- Stakeholder Feedback
- Government emphasis on long-term value, capital growth
- Comment Submission Deadline
- June 8, 2025, for the draft directions
- Gopal Srinivasan's Recommendation
- Raise AIF investment cap to 25% for regulated entities
Sources
RBI issues revised draft directions on investment by REs in AIFs, seeks comments
RBI proposes relaxing rules for investments in AIFs
Brokers can now set up arms, invest in new business
RBI proposes to ease AIF investment rules: What this means for banks and NBFCs
RBI weighs stricter dividend framework for banks after stakeholder feedback
