The Central Bank of India is poised to navigate the transition to the Reserve Bank of India's (RBI) new expected credit loss (ECL) framework with confidence. Managing Director and CEO Kalyan Kumar indicated that the bank has adequate provisioning buffers to absorb any potential impacts.
Under the ECL framework, banks will shift from an incurred loss model to a forward-looking, risk-based provisioning approach. This new system will categorize loans into three stages based on credit risk:
- Stage 1: Low risk
- Stage 2: Significant increase in credit risk
- Stage 3: Credit impaired
Kumar noted that the bank has already set aside ₹1,525 crore for Stage 1 and Stage 2 assets, while maintaining full provisioning for Stage 3 assets.
As of the end of March, the bank's loan book stood at ₹3.23 trillion, with the following classifications:
| Stage | Amount (₹) |
|---|---|
| Stage 1 | 2.9 trillion |
| Stage 2 | 11,399 crore |
| Stage 3 | 12,848 crore |
The ECL framework aligns Indian banking regulations with Indian Accounting Standards (Ind-AS) and requires banks to estimate credit losses based on several parameters, including the probability of default.
Analysts believe this shift will facilitate earlier recognition of financial stress and enhance portfolio management, although it may increase provisioning requirements and pressure profitability, particularly for public-sector banks.
Kumar expressed confidence that the Central Bank of India is well-positioned to handle the transition, citing regulatory flexibility on provisioning during the migration period as a supportive factor.
In the March quarter, the bank reported a 30% decline in net profit year-on-year, attributed mainly to a deferred tax adjustment linked to its transition to a new tax regime. Adjusted for this one-time impact, profitability would have improved compared to the previous year.
Looking ahead, the bank anticipates maintaining a growth momentum in FY27, targeting a deposit growth of 10-12% and advances growth of 14-16%, while aiming to keep its CASA (Current Account Savings Account) ratio around 48%.
For FY26, the Central Bank of India achieved a profit of ₹4,369 crore, marking a 15.43% increase from the previous year. The gross NPA ratio decreased to 2.67%, while net NPA fell to 0.49%.
In terms of retail lending, Kumar highlighted a 16% growth in auto loans, indicating room for improvement compared to competitors. The bank is enhancing its sales and distribution capabilities by adding staff and expanding its dealer network.
Digital transformation remains a priority, with the bank implementing end-to-end digital processes for various loan products and enhancing its mobile banking application.
Kumar reaffirmed the bank's strong capital position, with a capital adequacy ratio of 17.91% and a CET-1 ratio of 15.61%. He noted that there is no immediate need for additional capital, although the board has approved raising up to ₹7,000 crore if necessary.
Regarding compliance with minimum public shareholding norms, Kumar indicated that the bank would depend on the government's decisions regarding stake dilution.
