To buy to sell central bank to share
Shares of the Central Bank of India surged on Wednesday a day after the RBI removed the state-run lender from the Rapid Corrective Action Framework (PCA) – a mechanism aimed at helping commercial banks showing signs of stress to get back to normal.
The RBI’s action means the Central Bank is off the regulator’s watch list after more than five years.
The stock surged by Rs 3.2 or 15.5% to Rs 23.5 each on BSE with high volumes. As of 11:30 a.m., up to 46.3 lakh of Central Bank of India shares had changed hands for the day on BSE, down from a daily average of 8.5 lakh over the past two weeks.
The RBI said the Central Bank of India, which was listed in June 2017 due to high levels of bad loans and low return on assets, was no longer in breach of PCA parameters.
The PCA framework put in place by the regulator – the RBI – restricts commercial banks to lend freely.
Central Bank of India CEO and Managing Director MV Rao in an interaction with CNBC-TV18 expressed confidence that the lender’s gross non-performing assets will drop below 10% this year.
“A growth orientation of 10 to 12% is already taken into account… When we gave this orientation, we took into account that we would exit the APC because the measures that have been taken and we know that this is only a matter of time,” he said.
He also said there were no plans to monetize the assets. “We are only focused on enhancing the value of this subsidiary, and for that, the head office has been moved from Bhopal to Bombay… So we are not monetizing, we will increase the value of these”, Rao added.
He also said the bank’s net NPAs would be 3.65% in the third quarter and 3.43% in the next.
Slippages — or new bad loans — will be 1% in the second quarter, he said.
Shares of the Central Bank of India have risen by a fifth in value over the past month, a period in which the benchmark Nifty50 index remained stable and Nifty Bank – which tracks the performance of shares of The country’s 12 major lenders — including SBI, HDFC Bank and Kotak Mahindra Bank — gained 5.8%.
First post: STI