The sector’s total dividend limit would increase significantly under the proposed norms over current norms; however, this would be primarily driven by the banks with stronger CET 1 buffers. ICRA estimates that, going ahead, the actual dividend payout ratio is unlikely to rise materially as most of the high dividend paying PSBs will see either marginal rise or reduction in their limits, while most of the high dividend paying PVBs already pay much less than the permitted payout limits.

Exhibit: Actual dividend paid vs dividend limit – large PSBs for FY2025

Source: ICRA Research; Note: Segregated charts show large PSBs and other PSBs for better representation of data; *IOB’s payout was nil given accumulated losses