Dividend payout ratio cap limits bank dividend distributions; payouts within the cap require prudential compliance, higher sums need approval. Regulatory guidance shifts focus to a dividend payout ratio, allowing banks that satisfy minimum prudential criteria-sustained capital adequacy, limited net NPA, statutory and regulatory compliance, adequate provisioning and no explicit RBI restrictions-to declare dividends without prior approval provided payouts are from current profits and within the prudential cap; extraordinary items and adverse auditor qualifications must be excluded or adjusted when computing the ratio. Higher dividends or declarations by non eligible banks require prior RBI approval. Reporting to the Reserve Bank within a fortnight is mandatory.