Indian Banks May Pay Lower Dividends in FY26, But Why? Know Reason
As per a report, Indian banks are likely to pay slightly lower dividends to their shareholders in the financial year 2025-26 (FY26). A report by S&P Global Market Intelligence says that dividend payouts by 12 major banks could fall by about 4.2%, from USD 6.24 billion in FY25 to USD 5.98 billion in FY26.
A dividend by a bank is the portion of its profits that the bank distributes to its shareholders as a reward for their investment.
Dividend Paid by PSU Banks: Check Bank Wise dividend paid to the government below for FY 2024-25
| Bank | Dividend (Rs. Cr) |
|---|---|
| SBI | 8076.84 |
| PNB | 2335 |
| BOB | 2762 |
| Canara Bank | 2283.41 |
| Union Bank | |
| Bank of India | 1353 |
| Central Bank of India | |
| Indian Bank | 1616 |
| Indian Overseas Bank | |
| UCO Bank | 444.79 |
| Bank of Maharashtra | 918 |
| Punjab & Sind Bank | |
| EXIM Bank | 325 |
But this year, it’s expected that Banks may pay less dividend to shareholders. But Why? It’s due to lower net profits, margin pressure, rising costs, economic uncertainty.
- Lower Net Profits: Banks are expected to earn less because of weaker demand for loans and slower overall credit growth.
- Margin Pressure: Net Interest Margins (NIMs), which measure how much banks earn from lending compared to what they pay on deposits, are shrinking.
- Rising Costs: Competition for deposits is pushing up funding costs.
- Economic Uncertainty: Central bank restrictions on unsecured lending and weaker demand are also affecting profits.
Bank-Wise Dividend Outlook
- HDFC Bank: Dividend per share may drop from ₹11 in FY25 to ₹8.25 in FY26 (first cut in 4 years).
- Bank of Baroda: May lower dividend payout from ₹8.35 to ₹7.90.
- SBI: Expected to maintain dividend at ₹16 per share.
- ICICI Bank: Likely to increase dividend to ₹12 per share.
Finance Companies Gaining Ground
While banks are slowing down, finance companies (fincos) are expected to grow faster. Finance Companies are expected to grow by 21–22% vs. 11–12% for banks in the next two years.
Why Fintech Companies may grow faster? Fintech Companies may focus more on retail lending and work in under-served markets, and enjoy better margins.
Why Is Credit Growth Slowing for Banks?
There are several reasons for the slow growth of bank credit. Large companies are now using bond and commercial paper markets instead of relying on bank loans. The Reserve Bank of India (RBI) has tightened rules on unsecured lending. Higher deposit costs are reducing banks’ ability to lend cheaply.
FY26 may become the first year in many when bank dividends actually decline. Meanwhile, finance companies are strengthening their position in India’s lending market. Global and domestic policy changes, such as the US’s new tariffs on Indian goods and recent GST rate cuts, will also play a role in shaping banks’ profitability and payouts.
