Indian banks' dividend payouts may fall by 4.2% in FY26, says S&P

S&P Market Intelligence expects Indian banks' dividend pay-outs to decline 4.2% in FY26 as margins and profits weaken, with HDFC Bank and Bank of Baroda set to cut dividends

Indian banks’ dividend pay-outs are expected to decline in FY26 owing to subdued growth in net interest margins (NIMs) and net profits amid a slowdown in credit, according to a report by S&P Global Market Intelligence.

 

The analysis projects that the aggregate dividend of 12 large banks will fall by about 4.2 per cent to $5.98 billion in FY26.

 

This follows total pay-outs of $6.24 billion by the banks in the financial year ended March 31, 2025, which marked a 15.3 per cent rise from the previous year.

 

Tusharika Aggarwal, equity analyst at S&P Market Intelligence, said: “The expected decline in dividend pay-outs is rooted in a confluence of margin and profitability headwinds.” 

 

Leading banks including HDFC Bank and Bank of Baroda are expected to cut their dividend per share for the first time in at least four years.

 

HDFC Bank’s dividend per share is projected to fall to Rs 8.25 in FY26 from Rs 11 a year ago, according to S&P Market Intelligence estimates. Bank of Baroda may reduce its dividend to Rs 7.90 per share from Rs 8.35. Meanwhile, State Bank of India may keep its dividend largely unchanged at Rs 16, while ICICI Bank may increase it to Rs 12 in FY26, the estimates show.

 

Aggarwal said in the report that NIMs came under pressure due to rate cuts. At the same time, elevated competition for deposits is pushing funding costs higher. In addition, weaker credit growth amid subdued demand, the central bank’s caution towards unsecured lending and a “cautious economic backdrop” are likely to reduce the pace of earnings, he added.