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Central Bank of India to close or merge 600 branches: report

Photo: PTI

Mumbai: central bank of indiaa state-owned commercial bank, plans to close 13% of its branches to improve its financial health, which has been under pressure for several years, according to sources and a document seen by Reuters.

The bank is seeking to reduce the number of branches by 600 by closing or merging loss-making branches by the end of March 2023, according to the copy of a document reviewed by Reuters.

It is the most drastic step the lender has taken to improve its finances and will be followed by the sale of non-essential assets such as property, said a government source who did not wish to be named.

The closure of branches has not previously been reported. The more than 100-year-old lender currently has a network of 4,594 branches.

central bank with a clutch of other lenders was placed under RBIin 2017 after the regulator discovered that some public lenders were breaking its rules on regulatory capital, bad debts and leverage ratios.

Since then, all lenders except the Central Bank have improved their financial health and removed themselves from RBI’s PCA list.

“The bank is struggling to exit RBI’s PCA due to poor earnings performance since 2017 and to utilize labor more effectively and efficiently,” said the May 4 document sent by the headquarters to other branches and departments, detailing the rationale for the move.

central bank of India did not immediately respond to emails and calls seeking comment.

A bank under PCA is subject to greater scrutiny by the regulator and may face lending and deposit restrictions, branch expansion and hiring freezes and other limitations on borrowing.

The RBI introduced the standards at a time when Indian lenders were struggling with record levels of degraded assets, prompting the RBI to tighten the thresholds.

“The decision of the Central Bank of India is in line with the established strategy of reducing deficit assets on its books,” the government official said.

In the December quarter, the lender reported a profit of 2.82 billion Indian rupees ($37.1 million) against 1.66 billion rupees a year earlier in the same quarter.

However, its gross non-performing asset ratio (GNPA) remains high compared to its peers, standing at 15.16% at the end of December.

The bank was placed under the PCA in June 2017 and in that quarter the lender had incurred a loss of Rs 7.50 billion while its GNPA ratio was 17.27%. (Reuters)