A Mumbai-based mid-sized PSU bank is benefiting from its strong presence in rural and semi-urban areas across the country with 65% of its 4,567 branches at the end of the December 2025 quarter located in these areas.
The above strategy helped this PSU bank to report possibly one of the fastest-loan growth amongst PSU bank peers in Q3FY26. We are referring to Central Bank of India, which is often not covered in the financial media.
Valuation Gap: Why Central Bank of India stands out
This Mumbai-based PSU bank trades at one of the lowest valuations amongst PSU banks, on the preferred valuation matrix – price to (standalone) book value.
Central Bank of India trades at nearly 0.8 times its standalone book value. This means that if the book value of the bank is Rs 100, it is available for purchase for Rs 80. (Note: Now, a lower price to book value does not necessarily mean the bank is cheap. For instance, the lower number could be for reasons including investors are not sure of the growth trajectory of a bank or if a bank has a mediocre loan book.)
In contrast, State Bank of India (SBI), the largest PSU bank, trades at a price to (standalone) book value of nearly 1.8 times.
Let’s dig in to figure out what’s really going on with Central Bank of India.
Comparison in operational performance during December 2025 quarter
| Parameter | Central Bank of India | SBI |
| Net Interest Margin (Domestic %) | 2.96% | 3.12% |
| Loan Growth (YoY %) | 21.1% | 15.7% |
| Net Profit Growth (YoY %) | 31.7% | 24.5% |
| Standalone Return on Assets (Annualised %) | 1.01% | 1.19% |
Source – investor presentation and quarterly results
Central Bank of India grew its loan book by a whopping 21.1% y-o-y to Rs 3.16 lakh crore in the December 2025 quarter. It was amongst the fastest growth amongst PSU bank peers for this operational parameter in the quarter under review.
The bank highlighted strong growth in retail and SME loans, and these loans help a bank to higher rate of interest on advances as compared to loans to top notch corporates.
Larger rival, SBI also grew its advances by 15.7% y-o-y to Rs 46.27 lakh crore in the December 2025 and that was also thanks to retail and SME loans.
For another key parameter, net interest margin (NIM), Central Bank of India’s NIM was 2.96% in the December 2025 quarter as against 3.45% a year earlier.
Meanwhile, SBI’s NIM in its key domestic operations was 3.12% in the December 2025 quarter as against 3.15% a year earlier.
The RBI had cut repo rates in its meeting in early December 2025, and while interest rates on bank loans / credit facilities have come down, interest rates on deposits with the bank come down with a lag. This has created a temporary pressure on NIMs for banks.
Fall in provisions drives net profit growth for Central Bank of India
Asset quality of Central Bank of India was fairly good – its % of net non-performing assets was 0.45% in the December 2025 quarter as against 0.59% a year earlier.
Its provisions for non-performing assets were Rs 276.2 crore in Q3FY26 as against 309.8 crore a year earlier.
Central Bank of India has also highlighted its provision coverage ratio (PCR) was 96.7% in the December 2025 quarter, broadly in tune with a year earlier. Provisioning by Central Bank of India is well above regulatory requirements of RBI.
Strong loan growth and fall in provisions helped Central Bank of India’s standalone net profit rise by 31.7% y-o-y to Rs 1,262.6 crore in the Q3FY26.
Meanwhile, SBI’s provisions for non-performing assets was Rs 3,215.7 crore in the December 2025 quarter as against Rs 2,305 crore a year earlier. The largest bank in the country has highlighted that its provision coverage ratio was 75.5% at the end of the Q3FY26, higher than 74.6% reported a year earlier. Provisioning by SBI is above regulatory requirements.
SBI’s % of net NPAs was 0.39% in the December 2025 quarter as compared to 0.5% a year earlier. Strong growth in retail and SME loans also helped SBI’s standalone net profit rise by 24.5% to Rs 21,028 crore in Q3FY26.
Return on Assets: How Central Bank of India compares with larger rivals
Central Bank of India’s return on assets (annualised) was 1.01% in the December 2025 quarter.
SBI has highlighted its return on assets (net asset basis – annualised) was 1.19% in Q3FY26.
For context, HDFC Bank and Kotak Mahindra Bank have one of the highest Return on Assets (RoAs) in the banking industry, over the past several quarters. Kotak Mahindra Bank and HDFC Bank enjoyed identical RoA in the third quarter of FY26.
The return on average assets (not annualised) was 0.48% in the December 2025 quarter for both banks, and on annualising it for FY26 it would be nearly 1.92%.
Growth outlook – hopes of returning to normalcy from Middle East crisis
The global media reports indicate that both US and Iran are increasingly looking at a ceasefire, although there is no clarity and bombings have continued in the Middle East.
The war in the Middle East has created a shortage of various petroleum products in India over the past few weeks, rising operational costs for several industries, and several sectors have curtailed output owing to a shortage of inputs.
Investors are closely monitoring the situation in the Gulf and whether it would lead to a rise in NPA levels in the domestic banking industry.
The above development comes at a time when the RBI has taken several steps over the past one year to lower the cost of lending in the broader banking system, and boost lending.
Investors will be closely monitoring Central Bank of India and other leading banks to manage their operational parameters including NIM and loan growth, amongst others, going forward.
Is Central Bank of India mispriced?
Attractive valuations of Central Bank of India
| Price-to-(standalone) book value | |
| Central Bank of India | 0.8 |
| Bank of India | 0.8 |
| Punjab National Bank | 0.9 |
| Bank of Baroda | 0.93 |
| State Bank of India | 1.8 |
The government had earlier indicated that it is looking at another round of PSU bank mergers, and while exact details are not available, Central Bank of India is getting increased attention.
Central Bank of India trades at very attraction valuations – it currently trades at nearly 0.8 times its standalone book value, with one of the lowest valuations amongst PSU banks. Over the past 10 years, Central Bank of India has traded between 0.2 and 2 times its standalone book value.
SBI trades at 1.8 times its price to (standalone) book value. Over the past 10 years, SBI has traded between 0.6 times and 2.3 times standalone book value.
Central Bank of India has shown strong performance on several operational parameters in Q3FY26, and also trades at very reasonable valuations.
Investors can put Central Bank of India on their watch list for 2026, and monitor if the bank performs to expectations.
Disclaimer:
Amriteshwar Mathur is a financial journalist with over 20 years of experience.
Disclosure: The writer and his family do not hold the stocks discussed in this article.
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