CSB Bank Tier II bonds rating outlook was revised to Stable from Positive by India Ratings and Research on August 13, 2026, the private-sector lender said in a BSE filing on Thursday. The agency reaffirmed the rating on the bank’s ₹500 crore Basel III-compliant Tier II bonds programme at IND A.

CSB Bank clarified that it has not yet issued bonds under the programme. India Ratings continues to assess the bank on a standalone basis.

What drove the outlook revision

India Ratings attributed the revision to slow progress in diversifying CSB Bank’s franchise towards retail and small and medium enterprise loans during FY26. It also cited the constrained current account savings account ratio, a weak retail liability franchise and continued dependence on bulk deposits to fund the gold and wholesale businesses. According to the agency, these factors have contributed to a consistent moderation in profitability ratios.

The rating affirmation reflects growth in advances and deposits since FY24, comfortable capitalisation, stable profitability and strong asset quality. CSB Bank’s common equity Tier 1 ratio stood at 18.96% in the first quarter of FY27, compared with 18.93% in FY26.

  • Gross advances rose 24.05% year-on-year to ₹408.67 billion in the first quarter of FY27.
  • Total deposits increased 26.38% year-on-year to ₹454.15 billion.
  • The CASA ratio was 19.41%, while term deposits represented 80.59% of total deposits.
  • Gross non-performing assets stood at 1.75%, with net NPAs at 0.39%.

Gold loans accounted for about 54% of gross advances during the quarter. The rating agency said this portfolio supports capital efficiency because such loans attract lower risk weights under the prevailing regulatory framework.

Retail expansion remains under watch

Under its Sustain, Build, Scale 2030 roadmap, CSB Bank has invested in technology platforms and is seeking to expand retail advances and deposits. India Ratings said the ability to scale retail assets and liabilities while maintaining asset quality, improving funding granularity and sustaining profitability remains a key monitorable.

The agency also noted the bank’s geographical concentration, although exposure is gradually diversifying. Kerala and Tamil Nadu accounted for 31% and 16%, respectively, of total branches in the first quarter of FY27.

India Ratings assessed liquidity as adequate. CSB Bank’s average liquidity coverage ratio was 109.27% as of March 2026, above the regulatory requirement, while excess statutory liquidity ratio investments were around 37.78% over the prescribed level.

A positive rating action could follow broader product and geographical diversification alongside maintained profitability and capital buffers. A CET1 ratio below 13%, equity erosion, or sustained slippages and restructured assets beyond the thresholds specified by the agency could lead to negative action.

Source: BSE corporate announcement.