The Central Bank of India, a state-owned commercial bank, is planning to close 13% of its branches to improve its financial health, which has been under pressure for several years, according to sources and a document seen by Reuters. according.
The bank wants to reduce the number of branches to 600 by the end of March 2023 by closing or merging loss-making branches, according to a copy of the document reviewed by Reuters.
A government source, speaking on condition of anonymity, said this is the most drastic step the lender has taken to improve its finances and will be followed by sale of non-core assets like immovable property.
The closure of branches has not been informed earlier. The over 100 years old lender currently has a network of 4,594 branches.
The central bank, along with a group of other lenders, were placed under the RBI’s prompt corrective action (PCA) in 2017 after the regulator found that some state-run lenders were violating its rules on regulatory capital, bad loans and leverage ratios. were.
Since then all lenders except the central bank have improved their financial health and have come out of the RBI’s PCA list.
“The bank is struggling to come out of RBI’s PCA due to poor performance on profit since 2017 and utilization of manpower in a more efficient and effective manner,” said a May 4 document sent by the headquarters to other branches and departments. is.” The rationale behind this move.
Central Bank of India did not immediately respond to emails and calls seeking comment.
A bank under the PCA faces more scrutiny by the regulator and may face lending and deposit restrictions, branch expansion and rental moratoriums, and other limits on lending.
RBI introduced these norms at a time when Indian lenders were grappling with record levels of soured assets, prompting the RBI to tighten the thresholds.
“This move of Central Bank of India is in line with the stated strategy of reducing loss-making assets in its books of accounts,” a government official said.
In the December quarter, the lender reported a profit of Rs 282 crore ($37.1 million) as against Rs 166 crore in the corresponding quarter last year.
This gross non-performing asset (GNPA) ratio remains high compared to its peers, though it stood at 15.16% at the end of December.
The bank was placed under the PCA framework in June 2017 and the lender reported a loss of Rs 750 crore in that quarter, while its GNPA ratio stood at 17.27%.