According to a regulatory disclosure, the Reserve Bank of India (RBI) discovered a Rs 519 crore divergence in provisioning by the Central Bank of India in the fiscal year 2020 (FY20). As a result, the bank’s adjusted net loss for fiscal year 2020 has increased by Rs 519 crore to Rs 1,640 crore. The bank also revealed that the RBI discovered a Rs 89 crore discrepancy in the estimation of banks’ total non-performing assets (NPAs) as of March 31, 2020. In absolute terms, the bank’s gross NPAs is Rs 32,589.08 crore as of March 31, 2020, but the RBI estimated gross NPAs to be Rs 32678.08 crore.
During FY20, the bank declared more net NPAs than was needed. Although the lender registered net NPAs of Rs 11,534.46 crore at the end of FY20, the RBI’s appraisal revealed net NPAs of Rs 11,104.46 crore, meaning that the bank declared an additional Rs 430 crore in net NPAs. The bank is currently subject to the RBI’s prompt corrective action system (PCA). Due to high net non-performing assets and a negative return on assets, the banking regulator put the Central Bank of India under the PCA regime in June 2017. Under the PCA scheme, the regulator puts many limits on banks, including credit, executive pay, and directors’ fees.
During the current fiscal year’s December quarter, the lender’s net profit increased by 6% year on year (y-o-y) to Rs 165 crore (Q3FY21). Similarly, net interest income (NII) increased by 10% year on year to Rs 2,228 crore in Q3FY20. Although the bank’s gross NPA ratio stood at 16.3 percent as of December 2020, the net NPA ratio remained at 4.73 percent. On a pro forma basis, the bank’s net NPAs stood at 6.58 percent. The Supreme Court had ordered that no new NPAs be declared after August 31, 2020. As a result, banks reported NPAs on a pro-forma basis to represent the true image of asset quality.
