CRISIL said that the ratings continue to reflect expected strong support from the majority owner, government of India (GoI), and adequate resource profile of the bank.

Capitalisation has improved with timely capital infusion by GoI. In fiscal 2021, GoI had infused Rs 4,800 crore (Rs 3,353 crore in fiscal 2020, Rs 6.592 crore in fiscal 2019, and Rs 5,158 crore in fiscal 2018).

Consequently, the tier-1 and overall capital adequacy ratios (CAR) improved to 12.82% and 14.81%, respectively, as on 31 March 2021, from 9.33% and 11.72%, respectively, as on 31 March 2020.

These strengths are partially offset by weak asset quality and its impact on profitability, it added.

In line with the measures of Reserve Bank of India (RBI) for the COVID-19 pandemic, the bank had given moratorium to its borrowers. While collection efficiency declined during the initial months of the moratorium, it gradually improved.

However, the second wave of the pandemic resulted in intermittent lockdowns and localised restrictions, which led to delay in collections and impacted the cash flows of borrowers.

Also, under RBI's resolution frameworks 1.0 and 2.0 for COVID-19-related stress, the bank had implemented restructuring on 2.7% of gross advances as on 30 June 2021, over and above around 1% of advances restructured under the micro, small, and medium enterprise (MSME) scheme.

"Thus, the ability of the bank to manage collections and asset quality will be a key monitorable," the credit ratings agency said.

Nationalised in 1969, Central Bank was wholly owned by GoI until July 2007. After an initial public offering, GoI's stake declined to 93.08% as on 30 June 2021. Total advances and deposits were Rs 175,229 crore and Rs 331,483 crore, respectively, as on 30 June 2021. The bank has a network of 4,594 branches.

For the quarter ended 30 June 2021, profit after tax was Rs 206 crore on total income (net of interest expense) of Rs 2,902 crore, against Rs 135 crore and Rs 2,855 crore, respectively, for the corresponding period of the previous fiscal.

Shares of the public sector bank lost 0.47% to end at Rs 21 on the BSE on Friday.