With provisioning requirement raised to 5 per cent by the Reserve bank of India, banks might pass on the expense to their customers, said M. V. Tanksale, Chairman and Managing Director of Central Bank of India
“We will take a hit on our profitability with higher provisioning requirement and, hence, banks will price their products accordingly,” Tanksale said on the sidelines of an IMC event.
The higher provisioning will reduce banks’ internal accruals.
Therefore, banks will be required to infuse more capital, the chairman said.
“In a bank like ours, 50 per cent of the profit gets eroded in provisioning,” he added
Central Bank of India has received the Government’s approval for capital infusion of Rs 2,406 crore, which the bank plans to raise by mid-March through preferential allotment.