Central Bank of India: Navigating Growth and Efficiency in Q2 FY26

Central Bank of India has reported a robust performance for the second quarter and half year ended September 30, 2025, demonstrating significant growth across key financial metrics. The bank, a venerable institution with a 113-year legacy, continues to leverage its strong rural and semi-urban presence, where 65% of its branches are located. This quarter's results highlight a strategic focus on asset quality improvement and digital transformation, even as the bank addresses challenges in operational efficiency.

For the half year ended September 2025, the bank's total income stood at ₹20,779 crore, marking a 6.59% year-on-year increase. This was primarily driven by interest and dividend earned, which contributed ₹17,400 crore, alongside other income of ₹3,379 crore. Net profit for the quarter surged by 32.86% year-on-year to ₹1,213 crore, reflecting effective management of provisions and improved asset quality. Total business grew by 14.43% year-on-year to ₹7,37,938 crore, with total deposits increasing by 13.40% to ₹4,44,450 crore. Gross advances also saw a healthy rise of 16.03% to ₹2,93,488 crore.

Asset Quality and Profitability Dynamics

Central Bank of India has made significant strides in improving its asset quality. The Gross Non-Performing Assets (NPA) ratio reduced to 3.01% as of September 2025, a substantial decrease of 158 basis points year-on-year. Similarly, the Net NPA ratio improved to 0.48%, down 21 basis points year-on-year. This improvement is a testament to the bank's effective containment of slippages and robust asset management. Provisions for the quarter were significantly lower at ₹573 crore, a 54% reduction year-on-year and 50% quarter-on-quarter, indicating a healthier balance sheet.

Despite these gains, profitability metrics present a mixed picture. The Return on Asset (ROA) improved by 17 basis points to 1.01%, surpassing the 1% mark. Return on Equity (ROE) also saw a strong increase of 155 basis points to 14.22%. However, the Cost-to-Income ratio remains a concern, rising to 62.72% from 57.19% a year ago, reflecting increased operational expenses. Net Interest Income (NII) also experienced a slight reduction, decreasing by 2.96% quarter-on-quarter and 3.72% year-on-year. The bank acknowledges that approximately 60% of its advances are linked to the repo rate, leading to faster transmission of rate benefits to customers, while deposit repricing lags, impacting Net Interest Margin (NIM), which stood at 2.89%.

Strategic Focus and Digital Transformation

Management emphasized a strategic focus on the RAM (Retail, Agriculture, and MSME) sectors, which have demonstrated strong double-digit growth. The bank plans to further strengthen these areas through technology-driven processes, value chain financing, and targeted branch expansion in active clusters. This approach aims to capitalize on the bank's traditional strengths and the growth potential of these segments, especially as the corporate loan book has seen a reduction in recent periods.

Digital transformation is a cornerstone of the bank's strategy. Initiatives like the Digital Lending Platform (DLP), Complaint Management System (CMS), and Lead Management System (LMS) are designed to enhance customer experience, streamline operations, and improve conversion rates. The bank's digital transaction share through Alternate Delivery Channels (ADC) has increased to 88.29%, indicating strong adoption of its digital offerings. Strategic partnerships with entities like VinFast Auto India Pvt Ltd for EV financing, C2FO and KredX for MSME financing through TREDS, and TATA AIG for TREDS insurance policies further underscore the bank's commitment to innovation and expanding its reach.

Outlook and Management Vision

Central Bank of India's management expressed confidence in sustained improvement across all areas. The bank has provided guidance for FY26, targeting business growth of 14-15%, deposit growth of 10-12%, and advances growth of 14-16%. The RAM: Corporate Credit Ratio is aimed at 65:35. Efforts are underway to reduce the Cost-to-Income ratio to 54-55% by March 2026. The bank also aims to recover ₹2,000 crore from written-off accounts during the current financial year and is proactively provisioning for ECL requirements over the next seven quarters.

The bank's vision is to build a digitally enabled, customer-centric institution that optimizes returns for all stakeholders by revisiting business processes and leveraging technology. The focus on enhancing customer onboarding, providing superior banking experiences, and strengthening recovery mechanisms underscores a disciplined approach to growth and profitability. The bank's commitment to ESG initiatives, including green financing and employee well-being programs, further solidifies its long-term sustainability goals.

Central Bank of India's Q2 FY26 performance reflects a strategic clarity and disciplined execution, particularly in improving asset quality and driving digital adoption. While challenges in cost efficiency and NIM persist, the management's proactive measures and clear guidance indicate a focused path towards sustained growth and enhanced stakeholder value.