According to sources and a document obtained by Reuters, the Central Bank of India, a state-owned commercial bank, aims to close 13 percent of its branches to restore its financial health, which has been under pressure for several years.
According to a copy of a document reviewed by Reuters, the bank wants to cut the number of branches by 600 by closing or merging loss-making operations by the end of March 2023.
According to a government source who did not want to be identified, it is the most dramatic measure the lender has taken to strengthen its finances and would be followed by the sale of non-core assets such as real estate.
The closure of the branches was not previously mentioned. The lender, which has been around for over a century, now has 4,594 locations.
After the regulator discovered some state-run institutions were in violation of its regulations on regulatory capital, bad loans, and leverage ratios, the RBI imposed quick corrective action (PCA) on Central Bank and a number of other lenders in 2017.
Except for Central Bank, all of the lenders have improved their financial health since then and have been removed from the RBI’s PCA list.
“The bank is struggling to come out of RBI PCA due to poor profit performance since 2017 and to use manpower in a more efficient and effective manner,” according to a document handed out by the headquarters on May 4 to other branches and departments.
The Central Bank of India did not respond to requests for comment via email or phone.
A bank subject to PCA is subject to increased regulatory monitoring and may face lending and deposit limits, branch growth and hiring freezes, and other financing restrictions.
The RBI enacted these rules at a time when Indian bankers were dealing with record amounts of bad debt, pushing the central bank to raise the thresholds.
“Central bank of India’s move is in line with the set strategy of lowering loss-making assets in its books,” the government official said.
The lender made a profit of 2.82 billion Indian rupees ($37.1 million) in the December quarter, compared to 1.66 billion rupees in the same quarter the previous year.
However, its gross non-performing assets (GNPA) ratio remains high in comparison to its rivals, at 15.16 percent as of December 31.
The bank was placed under the PCA framework in June 2017, and it reported a loss of 7.50 billion rupees in that quarter, with a GNPA ratio of 17.27 percent.