Central Bank of India makes a corporate announcement

A Basel III Tier II bond issue would increase total CAR, but it would not increase the bank’s CET-1 ratio. Tier II qualifies as supplementary capital; therefore, assuming the issue is incremental, fully eligible and RWA is unchanged, the CAR uplift would be:

`CAR uplift in percentage points = Tier II issue amount / RWA × 100`

CET-1 would remain unchanged immediately because the proceeds do not add to common equity capital. ^[1]

Quantum of the proposed issuance

The capital instruments disclosure shows Rs 2,500 Crores of Basel III Tier II bonds in aggregate. ^[2] The annexure indicates that this comprises a Rs 1,500 Crores allotted instrument and a separate Rs 1,000 Crores Tier II line marked “yet to be issued”. ^[3]

Accordingly:

• Incremental/unissued tranche: Rs 1,000 Crores
• Aggregate Tier II programme: Rs 2,500 Crores
• The board’s broader approval to raise up to approximately Rs 7,000 Crores in equity or Basel III instruments is an approval ceiling, not evidence of a committed Rs 7,000 Crores Tier II issue. Management also stated that there was no immediate need to raise capital. ^[4]

Effect against the latest capital ratios

As of June 30, 2026, Q1 FY27, the bank reported Basel III CAR of 18.28% and Tier I capital of 16.54%. ^[5] The structured quarterly data reports standalone CET-1 at 16.5%. ^[6] Management’s earnings-call response separately cited CET-1 at 16.24%, so the precise CET-1 starting point should be reconciled to the regulatory capital schedule before calculating a detailed bridge. ^[4]

Key limitation: The latest quarterly results cited here report CAR and Tier I ratios but do not state the absolute RWA figure. Therefore, the exact capital infusion as a percentage of RWA cannot be calculated without that denominator. The issuance would also provide no net CAR benefit if it merely refinances or replaces existing Tier II capital, while RWA growth would dilute the uplift.

The latest placed Tier II issue is Basel III Tier II Series VI (ISIN INE483A08049), issued on 30 August 2023. It carries an 8.80% annual coupon, has a 10-year legal maturity to 30 August 2033, and has a first call option on 30 August 2028—effectively a five-year call from issuance. The issue size was Rs 1,500 Crores. ^[7]

Issuance terms

Cost versus earlier Tier II bonds

The comparison is economically meaningful directionally: the 2023 issue was priced below both earlier Tier II coupons. However, these are coupon comparisons, not yield-to-maturity comparisons. The older 9.80% and 9.20% instruments were subsequently called and are no longer outstanding; the 9.20% Series V was fully redeemed on 20 May 2025. ^[12]

Comparison with market and bank-wide funding costs

• As of 31 March 2026, the placed outstanding Tier II capital identified in the annual report was the Rs 1,500 Crores Series VI issue. ^[13]
• FY2026 Indian benchmark yields traded in a 6.48%-7.03% range. On a simple coupon-versus-benchmark basis, the 8.80% Tier II coupon represented a derived premium of approximately 177-232 bps over that range. ^{[14] [7]}
• The bank's FY2026 cost of funds was 4.83%, making the Series VI coupon approximately 397 bps higher; however, cost of funds is a bank-wide funding metric and is not directly comparable with subordinated Tier II debt. ^{[15] [7]}
• The bond disclosures report coupon rates and call dates but do not provide a current traded yield or YTM. Therefore, the strongest supported conclusion is that Series VI was cheaper than the bank's earlier Tier II coupons, while its current market yield cannot be established from the disclosed schedules.

The proposed raise is a growth buffer, not a prerequisite for Central Bank of India’s FY27 credit target. The Board approved raising up to Rs 7,000 Crores through equity and/or Basel III instruments, while management said the bank already had sufficient capital to support its 14–16% FY27 advances-growth guidance and had no immediate plan to raise capital ^{[16] [4]}.

Capital raise versus credit-growth guidance

Central Bank’s consolidated advances were Rs 338,209 Crores at March 2026 ^[17]. Applying management’s 14–16% guidance implies incremental advances of approximately Rs 47,349–54,113 Crores for FY27. Derived: the maximum Rs 7,000 Crores raise would equal roughly 13–15% of that implied incremental advances requirement, and only about 2.1% of the March advances base.

The comparison should not be read as a one-for-one funding ratio: bank lending capacity depends on risk-weighted assets, deposits, internal accruals and capital ratios, not simply on the amount of equity raised. This is particularly relevant because Q1 FY27 advances had already grown 28.58% YoY to Rs 354,348 Crores, well above the full-year guidance range, although a single quarter’s YoY growth does not establish the full-year outcome ^[18]. Management also reported a CRAR of 18.28% and Tier I capital of 16.54% as of June 30, 2026 ^[5].

Analyst read: the raise appears intended to preserve capital headroom for faster-than-guided growth, future regulatory requirements or balance-sheet optionality. It does not appear to be funding a capital shortfall against the stated FY27 target.

Peer size and leverage comparison

The closest asset-size peers are Indian Overseas Bank and Bank of Maharashtra, with UCO Bank somewhat smaller. Punjab & Sind Bank is materially smaller, while Bank of India is substantially larger.

Important distinction: CRAR/CAR is a capital-to-risk-weighted-assets measure; it is not the Basel III leverage ratio. Therefore, Central Bank’s leverage cannot be ranked reliably against these peers from the reported figures above. On the available capital-adequacy indicators, Central’s buffer is broadly comparable with Bank of India and PSB, but below the headline CRAR reported by UCO Bank and IOB. The peer asset comparison is directional because the asset references mix consolidated and standalone bases.