The Central Bank of India, a 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 documents seen by Reuters.
The bank is working to reduce the number of branches by 600 by either closing or merging disadvantaged branches by the end of March 2023, according to a copy of a document reviewed by Reuters.
It is the most drastic step taken by the lender to improve its finances and will be followed by the sale of non -core assets such as real estate, said a government source who did not want to be named.
Branch closures have not been reported before. The over 100 -year -old lender now has a network of 4,594 branches.
The Central Bank along with other groups of lenders were placed under the RBI’s immediate corrective action (PCA) in 2017 after regulators found some government lenders had violated its rules on regulatory capital, bad loans and leverage ratios.
Since then all lenders except the Central Bank have improved their financial health and dropped off the RBI PCA list.
“The bank is struggling to exit the RBI PCA due to poor performance on profits since 2017 and to use its workforce more efficiently and effectively,” a May 4 document sent by headquarters to other branches and departments stated, detailing the rationale behind the move that.
The Central Bank of India did not immediately respond to emails and calls for comment.
A bank under the PCA faces better scrutiny by regulators and may face lending and deposit restrictions, branch expansion and hiring freezes and other restrictions on lending.
The RBI introduced this norm at a time when Indian lenders are struggling with sour record levels of assets, prompting the RBI to tighten the threshold.
“India’s central bank’s move is in line with the strategy set to bring down the loss -making assets in its books,” the government official said.
In the December quarter, lenders reported a profit of Rs 282 crore ($ 37.1 million) compared to Rs 166 crore in the previous year in the same quarter.
The gross non -performing assets (GNPA) ratio remained high compared to its counterpart, however, at 15.16% at end -December.
The bank was placed under the PCA framework in June 2017 and during the quarter the lender had recorded a loss of Rs 750 crore while its GNPA ratio was at 17.27%.