Indian banks will likely reduce dividend payments in the fiscal year ending March 2026, as profitability comes under pressure amid slowing loans.

The aggregate dividend of 12 large banks included in an analysis by S&P Global Market Intelligence is projected to decline by about 4.2% to $5.98 billion in the current fiscal year ending March 31, 2026. This follows an aggregate payout of $6.24 billion by the banks in the fiscal year ended March 31, 2025, a 15.3% increase over the previous fiscal year.

The expected decline in dividend payouts "is rooted in a confluence of margin and profitability headwinds," said Tusharika Aggarwal, equity analyst at Market Intelligence.
Net interest margins are compressed due to rate cuts, while elevated competition for deposit funds is pushing funding costs higher. Additionally, weaker credit growth amid subdued demand, the Reserve Bank of India's checks on unsecured lending and a cautious economic backdrop are likely to reduce earnings momentum, Aggarwal said.

"It's shaping up to be another challenging yet intriguing year for forecasting payouts in the Indian banking sector, given the shifting momentum in the credit system," Aggarwal wrote in a July 24 research note.

India's biggest banks reported slower profit growth in the April–June quarter, indicating that lenders may struggle to maintain earnings momentum during the rest of the fiscal year.