Icra has downgraded the Rs 300 crore certificate of deposit (CD) programme of Centurion Bank from A1 to A2.
The rating agency said: "The rating takes into account the high provisioning requirements, low capital adequacy ratio and likely losses of the bank."
Icra has also placed the rating under watch with developing implications 'because of the uncertainties relating to the identification of a strategic partner, the pricing of the share and subscription to the preferential issue by the shareholders."
Icra, on September 11, had placed the bank's CD plan under watch with negative implications on the back of reported deterioration in the performance of the bank.
The gross and net non-performing assets (NPA) of Centurion Bank as on March 31 were 7.09 per cent and 3.58 per cent, respectively. This, however, does not include the Rs 29.72 crore shortfall in value of securities against capital market exposure. The bank also had not provided for the lease and hire purchase NPAs arising out of Twentieth Century Finance Corporation Ltd (TCFC) (Rs 29.92 crore).
Centurion Bank had not provided for the lease and hire purchase NPA as it was backed by a financial support agreement given by TCFC Finance Ltd.
Centurion Bank's CAR stands at 9.61 per cent as on March 31. However, if adjusted for the unprovided losses, the capital adequacy ratio would be lower than the Reserve Bank of India (RB) stipulated nine per cent.
The bank, to improve the CAR, came out with a rights issue of 10.67 lakh equity shares of Rs 10 each at a premium of Rs 2 per share in March. The issue, however, failed to achieve minimum subscription. The board of Centurion Bank has recently decided to sell a 23.12 per cent stake belonging to the chief promoter of the bank -- Dev Ahuja.
