Central Bank of India expects limited impact from new provisioning rules

The State Reserve Bank of India does not expect a significant impact from the Reserve Bank of India’s expected credit loss (ECL) framework, Managing Director and CEO Kalyan Kumar said, citing adequate provision buffers.

Under the ECL framework, banks will move from an “incurred loss” approach to a forward-looking, risk-based provisioning model, replacing the current overdue aging-based system. Loans will be classified into three stages based on credit risk: Stage 1 (low risk), Stage 2 (Significant increase in credit risk) and Stage 3 (Credit distressed).

“We are very conscious of the transition. We have already prepared the necessary provisions for phase 1 and phase 2 assets. ₹1,525 crore, apart from maintaining 100% provision for Phase 3 assets, Kumar said. Mint.

As of the end of March, the bank had a loan book. ₹3.44 trillion. The bank is in the process of calculating the loan book as per ECL norms at every stage as of FY26.

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The framework aligns Indian banking regulations more closely with Indian Accounting Standards (Ind-AS) and requires lenders to estimate loan losses using key parameters such as probability of default, loss given default and risk given default.

Analysts say this change enables earlier recognition of stress and more proactive portfolio management. But they warned that provisioning requirements for banks were expected to increase, potentially weighing on profitability and dividends, particularly for public sector lenders.

Banks in India are now well positioned to move to ECL. “The main impact will be the impact of higher provisioning factor on migration, especially for loans that are past due but are not yet non-performing assets or NPAs (Stage 2 loans),” said Sanjay Agarwal, senior director, CareEdge Ratings.

“We expect a 60-70 basis point decrease in banks’ capital adequacy ratios. The impact will be slightly higher in many public banks and lower in most private sector banks.”

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The bank is well positioned to absorb the transition and does not foresee any material impact, Kumar said, adding that regulatory flexibility regarding provisioning during the transition will ease the transition.

The Reserve Bank of India reported a 30% year-on-year decline in net profit in the March quarter (Q4 FY26). ₹730 crore.

“The decline is primarily due to: ₹632 crore deferred tax adjustment after the transition to the new tax regime… We have changed the tax rate, which was around 35% previously, to 25%. “For this reason, there was a one-time impact on deferred tax assets,” Kumar said, adding that when the one-time impact is taken into account, profitability will be higher compared to the same period last year.

Kumar said the bank expects to maintain its growth momentum in FY27, forecasting deposit growth to pick up at 10-12% and growth at 14-16% while maintaining CASA. (Current Account Savings Account) The rate is around 48 percent.

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Profit for FY26 was as follows: ₹4,369 crore, 15.43% higher than a year ago. The bank’s gross NPA was 2.67%, down 51 basis points in FY26. Its net NPA decreased by 6 basis points to 0.49% in FY26.

Total business of lender increased by 15.60% in FY26 ₹8.1 trillion against the target of 14-15%. Deposits increased by 13.38 percent ₹4.7 trillion and advances increased by 18.76% ₹3.4 trillion, exceeding the 14-16% forecast. While retail loans grew by over 25%, agriculture and MSME segments grew by 17.6% and 17.06% respectively. Corporate loans increased by approximately 14.5%. Lender’s savings deposits increased by over 10 percent ₹2 trillion.

On retail loans, Kumar said the 16% growth in auto loans leaves room for improvement compared to peers. “We are strengthening our sales and distribution. Around 500 people participate in sales, and we are expanding our dealer network,” he said.

Focusing on digital transformation as the mainstay of growth, the bank has enabled end-to-end digital journeys for products such as home and vehicle loans, including instant in-principle sanctions. On the liability side, it has introduced digital engagement platforms and developed its mobile banking application with more than 200 features, as well as a dedicated corporate mobile application.

“Banks that adapt to customer behavior and provide appropriate services will lead the growth,” Kumar said.

The bank maintains its capital structure with a capital adequacy ratio of 17.91% and a CET-1 ratio of 15.61%. Capital adequacy ratio and CET-1 ratio are basic indicators of a bank’s financial strength and loss absorbing capacity.

“We do not foresee any immediate capital requirements at this time,” Kumar said, adding that the board of directors ₹7,000 crore to maintain flexibility when required.

Kumar, who meets the minimum public shareholding norms (MPS) set by market regulator Securities and Exchange Board of India (Sebi), said the bank will rely on the government’s decision on share dilution through offer for sale. “QIP (qualified institutional placement) is an option, but we are comfortable with capital right now. We will depend on the government for MPS,” he said.