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Informist, Thursday, Aug. 13, 2026

NEW DELHI – India Ratings and Research revised the outlook on CSB Bank Ltd.'s Basel III-compliant tier-II bonds worth INR 5 billion to "stable" from "positive", while reaffirming the rating at "A", the lender informed exchanges Thursday. The bank has not yet issued bonds as part of the programme.

The outlook revision reflects CSB Bank's slow progress in diversifying into retail and small and medium enterprise lending in the financial year 2025-26 (Apr-Mar). The rating agency also considered the bank's weak current account savings account ratio, underdeveloped retail liability franchise, and continued reliance on bulk deposits to fund its gold and wholesale businesses. This has led to a steady decline in profitability ratios.

However, with the technology infrastructure stack in place, the bank is re-orientating towards the retail segment to diversify the franchise in the medium to long term. The ability to scale the retail asset and liability segments while maintaining asset quality, improving liability granularity, and sustaining profitability is a key factor to monitor, the rating agency said.

According to the rating agency, the bank's strengths include adequate capitalisation supported by internal accruals and Fairfax's presence, and adequate profitability with stable asset quality, while weaknesses include a concentrated geographic profile and a modest franchise that is aiming to improve granularity.

"The affirmation reflects CSB Bank's consistent performance in increasing advances and deposits since FY24, comfortable capitalisation, stable profitability, and strong asset quality," India Ratings and Research said. "Under the SBS (Sustain, Build, and Scale) 2030 strategy, CSB Bank has invested in technology platforms to boost growth, particularly in retail advances and deposits. However, the bank continues to exhibit geographical concentration. While it is pursuing diversification, this is likely to be gradual and materialise over the medium to long term." 

The rating agency said it could upgrade the ratings if the bank expands its franchise with product diversification while maintaining profitability, with return on assets above 1.3%, and strong capital buffers. An upgrade could also be driven by improved geographic diversification and greater granularity in the liability franchise. India Ratings said the lender is unlikely to require capital support from its parent under normal operating conditions in the medium term. However, it expects the key shareholder to extend support, within regulatory limits, if required.

In terms of asset quality, the bank's gross non-performing assets ratio was 1.75% as of Jun. 30, up from 1.66% a quarter ago. However, the net non-performing assets ratio saw a slight improvement to 0.39% as of Jun. 30 from 0.40% a quarter ago. Provisions dropped to INR 490.30 million from INR 607.90 million a quarter ago. The bank's Basel-III capital adequacy ratio was at 19.96% as of Jun. 30.

For the June quarter, CSB Bank's net profit rose around 27% on year to INR 1.50 billion, although it fell around 26% sequentially. Total income increased 18% to INR 15.16 billion from INR 12.86 billion a year ago and was marginally higher sequentially. 

"The rating continues to be supported by the presence of FIH Mauritius Investments Ltd. as a large investor," the rating agency said. "FIH Mauritius Investments's presence enhances CSB Bank's capability to attract talent and improve governance through best practices. CSB Bank also benefits from the various forms of support generally available from large investors with pedigree."

On the downside, the rating agency could downgrade the ratings if common equity tier-I falls below 13%, or if there is equity erosion or slippages in the non-gold portfolio, or restructured assets remain above 5% on a sustained basis. The bank's gold loan portfolio rose 47% on year to INR 219.06 billion for the June quarter.

Shares of CSB Bank ended at INR 323.75 apiece on the National Stock Exchange, up over 1% from Wednesday.  End

Reported by Vaishali Tyagi

Edited by Shubhayan Bhattacharya

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