CRISIL upgrades Central Bank rating on improvement in profitability

State-owned lender has improved asset quality, been profitable for eight consecutive quarters

Rating agency CRISIL has upgraded the rating for Central Bank of India’s long term debt from “A+” to “AA-”, citing sustained improvement in profitability and improved asset quality.

The Reserve Bank of India (RBI) took the state-owned Central Bank out of its prompt corrective action (PCA) in September 2022.

A CRISIL statement said Central Bank has been profitable for eight consecutive quarters (since Q1 FY22). The lender’s profit after tax (PAT) increased to Rs 1,582 crore in FY23, from Rs 1,045 crore in FY22. Profitability should sustain due to lower credit cost, reduced incremental stress and focus remain on maintaining asset quality.

Central Bank’s slippages in FY23 were 2.4 per cent compared to 3.0 per cent in fiscal 2022. Reported gross non-performing assets (NPA) fell sharply to 8.4 per cent as on March 31, 2023, from 14.8 per cent a year earlier, supported mainly by write-offs and partly by recoveries. Net NPAs also declined to 1.8 per cent from 3.9 per cent a year ago. As on March 31, 2023, restructured advances accounted for 3.1 per cent of the portfolio (4.6 per cent a year earlier).

The Mumbai-based lender’s capital position has also improved, supported by timely equity infusion by the majority stakeholder, the Indian government, and internal accrual. Between fiscal 2018 and 2021, the government infused Rs 19,903 crore which resulted in a substantial improvement in the capital adequacy of the bank. Supported by internal accrual, the capital adequacy ratio (CAR) was 14.1 per cent as on March 31, 2023. With continued profitability, the capital position is expected to remain adequate.

Central Bank’s ratings reflect the expectation of strong government support and the lender’s adequate resource profile, said CRI