Higher provisioning for bad loans dented Central Bank of India's profits in the July-September quarter. The public sector bank's net profit declined 36 per cent to Rs 244 crore, against Rs 379 crore in the corresponding quarter last year.
Like other public sector banks, Central Bank of India too has shown a rise in non-performing assets due to system-driven recognition of non-performing assets.
The bank's gross NPAs increased to Rs 3,840 crore as at September-end 2011 from Rs 2,883 crore as at June-end 2011. In the reporting quarter, loan loss provisions made by the bank jumped to Rs 392 crore (Rs 80 crore in the corresponding year-ago period).
System-driven recognition of NPAs started late in Central Bank (in December 2010), following completion of the process of putting the whole bank on the core banking platform.
“All loan accounts above Rs 10 lakh are now subject to system-driven NPA recognition. Over the next couple of quarters, the remaining small accounts (below Rs 10 lakh) will also be subjected to this rigour. So, NPAs could go up a bit,” said Mr M.V. Tanksale, Chairman and Managing Director, Central Bank of India.
The proportion of low-cost current account and savings bank deposits declined to 32.82 per cent as at September-end 2011, against 34.44 per cent as at September-end 2010 due to migration of funds to fixed deposits, which are fetching higher interest rates.
Among others, the bank is following a conscious strategy of increasing retail deposits and assets, redeeming high cost bulk deposits, and making aggressive recoveries to hold the net interest margin at around 3 per cent.
“Our bank did not renew high cost bulk deposits aggregating Rs 1,800 crore in the second quarter. We expect to redeem Rs 3,000-Rs 4,000 crore worth of high cost deposits so as to bring down the cost of deposits,” said Mr Tanksale.
In the half-year ended September 30, 2011, the bank's net profit declined 27 per cent to Rs 525 crore (Rs 716 crore).
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