Central Bank of India makes a corporate announcement

Tier II would increase total CAR, but it would not increase CET-1. The specifically unissued Basel III Tier II tranche is Rs 1,000 Crores, equal to 0.52% of the latest reported Total Credit RWA of Rs 1,91,905 Crores (derived). The broader Basel III Tier II programme is reported at Rs 2,500 Crores, equivalent to 1.30% of Credit RWA (derived). ^{[1] [2] [3]}

Capital impact

\*Illustrative calculation assumes full regulatory recognition, no change in RWA, and that the amount is incremental to capital already included in the reported ratio. †Calculated as quantum divided by Rs 1,91,905 Crores of reported Credit RWA.

CET-1 implication

The latest quarterly results report Basel III CRAR of 18.28% and Tier I capital of 16.54% as of June 30, 2026. ^[4] The structured quarterly KPI reports standalone CET-1 of 16.50% for Q1 FY27. ^[6]

Accordingly, a Tier II bond issue would:

• Lift the denominator-adjusted total CAR through the addition of eligible supplementary capital.
• Leave the CET-1 numerator unchanged, because Tier II is debt capital rather than common equity capital.
• Leave CET-1 broadly unchanged initially if RWA is unchanged; however, subsequent loan growth funded by the issuance could increase RWA and dilute both CAR and CET-1.

Important distinction

The Rs 1,000 Crores is the relevant incremental Tier II quantum if the Rs 1,500-Crore Tier II line in the annexure is already issued or recognized. The full Rs 2,500 Crores should not be added again to the current CAR unless the entire amount is genuinely incremental. Also, the reported denominator is Credit RWA, not separately disclosed total regulatory RWA; therefore, the calculated CAR uplift is an approximation rather than an exact post-issuance CAR.

Management also stated during the Q1 FY27 call that, despite the Board authorisation of up to Rs 7,000 Crores, the bank had no immediate capital-raising plan because its capital position was considered adequate. ^[5]

The identified issuance is Central Bank of India’s Basel III Tier II Series VI bond: an 8.80% fixed annual coupon, 10-year tenor, with a stated call option on 30 August 2028. On a coupon basis, it is 40 bps cheaper than the bank’s preceding comparable Series V Tier II bond, but its coupon remains well above prevailing government-bond benchmarks.

Issuance terms and prior Tier II comparison

Cost comparison: Series VI’s 8.80% coupon is 0.40 percentage points lower than Series V’s 9.20% coupon, a direct coupon-cost comparison based on the disclosed terms. The older Series III and Series IV bonds were also called and redeemed, but their coupon rates are not provided in the cited instrument disclosures; therefore, their coupons should not be inferred from the interest amounts paid. Series IV was called on 30 November 2024 ^[11], while Series III was redeemed on 29 May 2024 ^[12].

Comparison with market yields

FY26 benchmark yields traded in a 6.48%-7.03% range ^[13]. Relative to that range, the Series VI coupon implies a derived premium of approximately 1.77-2.32 pp:

• 8.80% Series VI coupon ^[9]
• Less 6.48%-7.03% benchmark yield range ^[13]
• Derived premium: 1.77-2.32 pp

This premium is directionally reasonable for an unsecured, subordinated Basel III Tier II instrument with loss-absorption features and a call subject to prior RBI approval ^{[14] [15]}. It should not, however, be described as the bank’s current market yield: the 8.80% is the contractual coupon, while the bond’s yield-to-maturity would depend on its trading price.

The bank reports yields on its investment portfolio—6.74% excluding trading gains and 7.30% including trading gains in FY26—but these are asset yields, not borrowing costs ^[13]. An instrument-level yield-to-maturity or prevailing yield for the bank’s broader existing long-term debt is not reported in the cited disclosures, so a precise comparison with all long-term borrowings is not possible. The August 2026 CRISIL upgrade of Series VI to AA+ improves the credit rating, but does not change its fixed 8.80% contractual coupon ^[16].

The Rs 7,000 crore raise is sizeable relative to the bank’s planned credit expansion, but it is better viewed as a capital-buffer and regulatory/public-shareholding raise than as direct funding for incremental loans. Central Bank’s FY27 guidance is for 14–16% advances growth ^[17], while the authorised raise is up to Rs 7,000 crore, subject to funding needs, market conditions and approvals ^[18].

Capital raise versus FY27 credit guidance

Central Bank’s FY26 gross advances were Rs 3,44,516 crore ^[19]. Applying the 14–16% FY27 guidance to that base implies incremental advances of approximately Rs 48,232–55,123 crore. The Rs 7,000 crore equity envelope therefore equals roughly 12.7–14.5% of the implied incremental advances—a material contribution, but not a one-for-one funding requirement.

The comparison needs an important qualification:

• Equity capital supports risk-weighted assets and regulatory capital, not the entire loan value. The Rs 7,000 crore cannot therefore be treated as financing Rs 7,000 crore of additional credit.
• The annual report explicitly links the raise to maintaining a healthy CRAR against a 14–15% business projection, as well as increasing public shareholding; proceeds are for general business purposes ^[18].
• The bank’s FY26 CET1 capital was Rs 33,951 crore, with a CET1 ratio of 15.61%, and its CRAR was 17.91% at 31 March 2026 ^[20]. On that basis, the proposed raise is approximately 20.6% of existing CET1 capital, making it a meaningful capital replenishment rather than a routine balance-sheet exercise.
• Q1 FY27 advances were already up 28.58% year on year to Rs 3,54,348 crore, but management retained the more conservative full-year 14–16% guidance ^[21]. This suggests the raise is intended to preserve capital headroom while allowing growth to continue, rather than signalling a formal acceleration of the target.

Leverage versus similarly sized PSBs

The latest explicit Basel leverage ratio available for Central Bank is 5.85% as of 31 March 2026, versus 6.15% a year earlier ^[20]. A like-for-like peer ranking cannot be made because the Q1 FY27 disclosures for the comparison banks refer to separate Pillar 3 disclosures but do not report numeric leverage ratios in the cited results.

Analytical read: IOB, Bank of Maharashtra and UCO Bank form the closest disclosed asset-size cluster around Central Bank; Punjab & Sind Bank is materially smaller, while Bank of India is substantially larger. Central’s 5.85% leverage ratio cannot be judged as higher or lower than that cluster without the peers’ actual Basel leverage figures. The available CRAR data places Central broadly within the peer range, but CRAR and leverage ratio are different measures and should not be substituted for one another.