The Reserve Bank of India (RBI) on Tuesday said Central Bank of India has been taken out of the prompt corrective action (PCA) framework, subject to specific conditions. The Mumbai-based lender was the last bank that remained under the regulator’s quarantine framework for weak banks after the asset quality review of 2015-16.
Central Bank turned the corner in FY22, posting its first full year of profit after FY15. Its net profit for the year stood at Rs 1,045 crore. In Q1FY23, the bank reported a 14% year-on-year (y-o-y) growth in the profit to Rs 235 crore. It was brought under the PCA in June 2017. The PCA framework imposes restrictions on a bank’s ability to grow risk-weighted assets, branch expansion and management expansion, depending on the threshold under which a particular bank is being penalised.
The RBI said the performance of Central Bank was reviewed by the board for financial supervision. “It was noted that as per the assessed figures of the bank for the year ended March 31, 2022, the bank is not in the breach of the PCA parameters. The bank has provided a written commitment that it would comply with the norms of minimum regulatory capital, net NPA (non-performing assets) and leverage ratio on an ongoing basis and has apprised the RBI of the structural and systemic improvements that it has put in place which would help the bank in continuing to meet these commitments,” the RBI said.
Taking all the above into consideration, the regulator decided to take Central Bank out of the PCA restrictions, subject to certain conditions and continuous monitoring.
Last month, the RBI had said the sustainability of a weak bank’s turnaround is a crucial precondition for it to exit PCA. MK Jain, deputy governor, RBI, had said, “It’s not only the quantitative parameters, but it’s also the qualitative parameters which we examine before taking any decision because when any bank has been taken out of the PCA, it should be on a sustainable basis.”
Central Bank has managed to reduce its net NPA ratio to 3.93% in Q1FY23. Its capital to risk-weighted assets ratio (CRAR) stood at 13.33% as on June 30, and the core equity tier-1 (CET-1) ratio was at 11.41%. The return on assets for Q1 stood at 0.27%.
Gross advances rose 11% YoY to Rs 1.95 trillion as on June 30, 2022. Retail, agri and small enterprise loans accounted for 65.6% of the total loan book, with the rest being corporate loans. Central Bank’s total deposits rose 3.4% to Rs 3.43 trillion at the end of June 2022. The share of current accounts savings accounts (CASA) in total deposits was 51.15% as on June 30, 2022.