A technical write-off of Rs 9,514 crore by the Central Bank of India in the quarter ended September was on account of some corporate loans that had turned bad and some cases in the National Company Law Tribunal, a senior bank official told Moneycontrol.
“These loans are mostly corporate loans such as big corporates, NCLT cases and fraud cases, among others. The growth of the bank has been good so that’s why we had the cushion to write off such advances and these loans are 100 percent provisioned,” said the official, who spoke on condition of anonymity and did not provide additional details.
The state-owned bank, which reported a 27 percent increase in net profit on October 20, had a regular write-off of Rs 82 crore in the second quarter of FY23. The technical write-off was nil a year earlier and in FY22.
A loan is written off when banks want to clean up their balance sheets of non-performing assets (NPA). An asset becomes non-performing when it ceases to generate income for the bank. Loans are typically written off when there is a 100 percent provision for them and there is no scope for recovery.
NPA levels
The bank’s gross NPAs improved to Rs 19,059 crore in July-September, or 9.67 percent of gross advances, compared with Rs 27,252 crore, or 15.52 percent, a year earlier. The lender’s net NPAs eased to 2.95 percent from 4.51 percent a year ago.
“The gross NPAs have reduced in one year. So basically, it is balance sheet management,” the official said.
Agriculture and allied sectors contributed 6.99 percent to the NPA, while small businesses constituted 4.02 percent, according to an investor presentation by the bank.
The provision coverage ratio was 89.20 percent as against 85.86 percent a year earlier, an improvement of 334 basis points.
The bank’s Capital to Risk (Weighted) Assets Ratio (CRAR), as per BASEL-III norms, was 13.56 percent in the quarter compared with 13.51 percent in the year-ago period.
Central Bank exited the prompt corrective action (PCA) framework of the Reserve Bank of India after its performance under all parameters improved sustainably during the past five quarters as well as the reporting quarter. The RBI imposed the PCA norms on the bank in June 2017 due to its high levels of net NPAs and negative returns on assets.
Earnings card
Central Bank’s net profit climbed to Rs 318 crore during the quarter from Rs 250 crore a year earlier after an increase in net interest income and writeback of provisions due to cash recoveries, upgrading or restructuring.
Net interest income, which is the difference between the interest earned from lending and the interest paid to depositors, increased to Rs 2,747 crore from Rs 2,206 crore in the corresponding quarter last year. Provision writebacks amounted to Rs 969 crore as compared to Rs 867 crore in the previous quarter.
Deposits increased to Rs 1.74 lakh crore Rs 1.67 lakh crore a year earlier, a growth of 4.24 percent. The share of current and savings accounts in total deposits improved 120 basis points to 50.99 percent.
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