Following the Reserve Bank of India’s (RBI) decision to withdraw the lender from the PCA framework after more than five years, shares of the Central Bank of India started trading 15.5 percent higher on Wednesday.
At 9.40 am, the stock was up 11% over its previous close, trading at Rs 22.60 on the BSE.
The sole bank covered under the PCA framework of the RBI was the Central Bank of India. Due to its high net non-performing assets (NPAs) and low return on assets, it was placed under surveillance in June 2017. When banks violate specific regulatory standards, such as those relating to return on assets, minimum capital requirements, and the quantity of non-performing assets, including those related to lending, management compensation, and directors’ fees, PCA is triggered.
A weak bank’s ability to continue its turnaround is an essential prerequisite for the RBI to exit PCA, the RBI stated on August 8.
The bank did, however, turn the corner in FY22, reporting its second consecutive full-year profit. In the fiscal year, it reported a profit of Rs 1,045 crore. In comparison to the same quarter the year before, it reported a 14.2 percent increase in net profit for the June quarter, coming in at Rs 234.78 crore as opposed to Rs 205.58 crore. In comparison to the same time last year, the gross NPA ratio decreased to 14.9% of gross advances from 15.92%. Additionally, Net NPAs decreased from 5.09 percent in the first quarter of the prior fiscal year to 3.93 percent in that quarter.
As of June, gross advances totaled Rs 1.95 trillion, an increase of 11% over the prior year. Sixty-six percent of the total loan book was made up of small and retail agro loans. Deposits as a whole increased by 3.4% to Rs 3.43 trillion. CASA made up 51.5 percent of the total deposits.
As a systematic early intervention tool modelled after the Federal Deposit Insurance Corp.’s (FDIC) PCA framework, the PCA framework was established in December 2002. Later, in April 2017, these rules underwent revision.
