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Brickwork Ratings (BWR) has upgraded the ratings of Central Bank of India’s Basel III Tier II Bonds aggregating ₹2,000 crore from ‘A’ to ‘A+’ and of Innovative Perpetual Debt Instruments aggregating ₹500 crore from ‘A-’ to ‘A’.
The outlook on these ratings has been revised from Negative to Stable.
Instruments with ‘A’ rating are considered to have adequate degree of safety regarding timely servicing of financial obligations and carry low credit risk.
The agency said the rating upgrade factors in the substantial capital infusion from the Government of India (GOI) in the Bank amounting to ₹5,913 crore over the period of last year, improving the capital adequacy ratios of the Bank.
The capital to risk-weighted assets ratio (CRAR) is 12.69 per cent and Tier I/ CET (common equity tier)-1 ratio is 10.34 per cent as of September 30, 2019, which are well above the regulatory capital requirement of 11.5 per cent and 9.5/8 per cent respectively required as of March 31, 2020.
Further, BWR said it has factored an expectation of improved performance of the Bank for H1(April-September) FY20 to continue for the remaining part of FY20 and revised the outlook from negative to stable.
Though the pressure on asset quality may continue given the weak external environment, BWR observed that the Bank has adequate capital to absorb any increase in required provisions. Capital to Net NPA (non-performing asset) ratio has improved from 125 per cent as of March 31, 2019 to 163 per cent as of September 30, 2019.
“The Bank is also making efforts to exit the Prompt Corrective Action (PCA) framework of RBI. The divergence of NPA for FY19 increasing the Bank’s provisions is expected to be taken care of, with better and faster recoveries, and continuation of the decrease in slippages to NPA over the next few quarters,” BWR said.
The Bank’s management has informed BWR of the initiatives taken to step up recoveries, and bring down provisioning costs. Faster resolution of accounts under NCLT (National Company Law Tribunal) proceedings also will be positive for the bank, the agency said.
BWR said the Bank also plans to raise additional capital, which will assist in enhancing the credit growth and meeting any adverse exigencies, if required.
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