Central Bank lending grew 29.83% year over year to INR381,032 crore in the quarter ended September 30, 2026, outpacing domestic deposit growth of 14.41%. Central Bank of India reported net profit of INR1,469 crore for Q2 FY27, while its earnings discussion highlighted a weaker-than-targeted low-cost deposit mix and preparations for expected credit-loss provisioning.
Key Takeaways
- Domestic lending rose 27%, while the new GIFT City branch contributed INR8,093 crore in advances.
- The low-cost deposit ratio and cost-to-income ratio missed management’s targets.
- Management estimated total expected credit-loss provisioning needs at INR5,000–5,500 crore, with part already provided.
Table of Contents
- Central Bank lending grows across corporate and retail books
- Deposit mix and operating costs remain below target
- Lower bad-loan ratios accompany a provisioning build
- Management targets higher yields but flags treasury pressure
- Conclusion
Central Bank lending grows across corporate and retail books
Domestic advances reached INR372,939 crore, with a further INR8,093 crore contributed by the GIFT City branch, which opened on June 29, 2026. Total business increased 20.54% to INR889,541 crore. The bank lists its Q2 FY2026–27 provisional business figures among its official investor disclosures.
Corporate lending grew 42% to INR118,666 crore, representing 32% of the loan book. Managing Director and Chief Executive Kalyan Kumar described a pipeline of roughly INR24,000 crore, including more than INR7,000 crore pending disbursement. Amounts still being processed or considered are not completed lending.
Retail, agriculture and micro, small and medium-sized enterprise loans together grew 21.11% to INR254,273 crore. Retail lending increased 24.49%, agriculture 19.92% and MSME lending 17.36%, leaving the combined segment’s share of credit at 68%.
| Item | Details |
|---|---|
| Cost-to-income ratio | 58.95%, versus 62.42% in Q2 FY26; guidance below 56%. |
| Return on assets | 1.03%, an improvement of 3 basis points. |
| Slippage ratio | 0.24%, against guidance below 0.25%. |
| Liquidity coverage ratio | 156%, reported as improved. |
| Business per employee | INR25.26 crore, versus INR21.48 crore in Q2 FY26. |
Deposit mix and operating costs remain below target
Domestic deposits rose to INR508,509 crore. Current and savings account deposits, known as CASA, increased 9.23% to INR226,774 crore, but their share of deposits was 44.65%, below guidance of 48% plus or minus one percentage point. Kumar attributed the shortfall to foreign-currency non-resident deposit mobilization.
The difference matters because loan growth was running substantially faster than domestic deposit growth. The credit-deposit ratio reached 75%, making deposit acquisition and the funding mix important measures alongside expansion of the loan book.
Operating efficiency improved, but the cost-to-income ratio remained above management’s target. Net interest income increased 26.28% to INR4,146 crore, while net interest margin held at 3.01%, just above the bank’s stated threshold.
Lower bad-loan ratios accompany a provisioning build
Gross nonperforming assets stood at 2.39% of advances and net nonperforming assets at 0.31%. Provision coverage reached 97.16%. Kumar said the bank was deliberately building provisions during stronger operating conditions to improve resilience.
Standard-advance provisions rose to INR399 crore from INR30–37 crore a year earlier, which management largely attributed to growth in standard advances. Quarterly credit cost was 0.53%.
Kumar estimated total expected credit-loss provisioning requirements at INR5,000–5,500 crore. The bank had already provided INR1,525 crore for Stage 1 and Stage 2 exposures, with Stage 3 fully provided. He did not commit to recognizing the remaining requirement immediately or spreading it over time, saying the approach would be decided after discussion.
Management targets higher yields but flags treasury pressure
Kumar expressed confidence that return on assets would remain above 1%. He cited a deposit cost of 4.60%, an advances yield of 7.87% and new lending priorities, including gold loans and self-help groups. About 61% of the loan book was linked to an external benchmark, which management said would support yields if reference rates increased.
That margin outlook was conditional, not a reported improvement. Treasury conditions were less favorable: management said rising bond yields had put mark-to-market pressure on the available-for-sale portfolio, with its provision increasing from INR843 crore to INR1,023 crore.
The bank also expected INR700 crore from an aviation-account recovery in Q3 or Q4, subject to the ongoing auction process. That amount remained an expected recovery rather than cash already received.
Conclusion
The quarter combined rapid credit expansion with lower bad-loan ratios, but funding mix and operating efficiency remained short of management’s targets. The next checkpoints are the pending decision on expected credit-loss provisioning and the aviation-account recovery targeted for Q3 or Q4.
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