Credit Rating

SEC/195/2026 August 13, 2026 BSE Limited, National Stock Exchange of India Ltd., Corporate Relationship Department, Listing Department, Phiroze Jeejeebhoy Towers, Exchange plaza, 5th floor, Dalal Street, Bandra-kurla Complex, Mumbai 400001. Bandra (E), Mumbai 400051. Scrip code: 542867 Symbol: CSBBANK Dear Sir/Madam, Revision in Outlook on the Bank’s Tier II Bonds Issue Programme by India Ratings & Research -------------------------------------------------------------------------------------------------------------------------------------- Pursuant to Regulation 30 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, this is to inform you that, India Ratings & Research, vide letter dated August 13, 2026, has revised the Outlook on the Bank’s ₹500 Crore, Basel III-compliant Tier II Bonds issue Programme of the CSB Bank Limited (the “Bank”) from ‘Positive’ to ‘Stable’, while reaffirming the rating at ‘IND A’. The Bank has not yet issued bonds as part of the programme. The detailed rationale for the aforesaid revision as released by India Ratings & Research on August 13, 2026, is enclosed herewith. Kindly take the same on record. Thanking You. Yours faithfully, Sijo Varghese Company Secretary CSB Bank Limited Regd. Office: CSB Bhavan, St. Mary's College Road, Thrissur – 680020, Kerala, India. Tel: +91 487–2333020 | Fax: +91 487–2338764 | Website: www.csb.bank.in | Email: secretarial@csb.bank.in |CIN: L65191KL1920PLC000175 India Ratings Revises Outlook on CSB Bank’s Tier II Bonds to Stable; Affirms at ‘IND A’ Aug 13, 2026 | CSB Bank Limited | Private Sector Bank India Ratings and Research (Ind-Ra) has revised the Outlook on CSB Bank Limited’s (CSB Bank) Tier II bonds to Stable from Positive while affirming the rating at ‘IND A’ as follows: Details of Instruments Size of Rating Assigned Instrument Regulator of Date of Coupon Maturity Issue (INR along with Rating Action Description Instrument Issuance Rate (%) Date million) Watch/Outlook Basel III- SEBI - - - 5,000 IND A/Stable Outlook revised to Compliant Tier Stable; Affirmed II Bonds* *Yet to be issued Analytical Approach Ind-Ra continues to take a standalone view of CSB Bank to arrive at the rating. Detailed Rationale of the Rating Action The Outlook revision reflects CSB Bank’s slow traction in diversifying the franchise towards the retail and small and medium enterprises (SME) loan segments in FY26. The revision also factors in the bank’s constrained current account savings account (CASA) ratio in FY26, weak retail liability franchise, and continued dependence on bulk deposits to fund its gold and wholesale franchise, which has led to a consistent moderation in profitability ratios. However, with the technology infrastructure stack in place, CSB 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 monitorable. The affirmation reflects CSB Bank’s consistent performance in increasing advances and deposits since FY24, comfortable capitalisation, stable profitability, and strong asset quality. Under the SBS 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. List of Key Rating Drivers Strengths Adequate capitalisation led by internal accruals Fairfax presence Profitability adequate with stable asset quality Weaknesses Concentrated geographical profile; diversification underway Weak liability franchise Modest franchise with an aim to improve granularity Detailed Description of Key Rating Drivers Adequate Capitalisation Led by Internal Accruals: CSB Bank’s common equity Tier 1 (CET1) ratio remained broadly stable at 18.96% in 1QFY27 (FY26: 18.93%; FY25: 20.59%), led by steady internal accruals. Ind-Ra does not expect the bank to require any material capital raise to support its medium-term growth plans. Its gross advances increased 24.05% yoy to INR408.67 billion in 1QFY27, primarily on strong 46.74% and 37.28% yoy growth in the gold and corporate loan portfolios, respectively. The bank’s capital position continues to benefit from the sizeable share of gold loans in its portfolio, as these attract lower risk weights. Gold loans accounted for around 54% of the gross advances as of 1QFY27 (1QFY26: 45%), providing meaningful capital efficiencies under the prevailing regulatory framework. Fairfax Presence: The rating continues to be supported by the presence of FIH Mauritius Investments Limited (FIH; Fairfax Holdings company) as a large investor (1QFY27: 40% stake). FIH’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. The bank has, over the past few years, appointed senior management personnel and is likely to continue building upon the teams over the medium term. This enables CSB Bank to expand in terms of geography, scale, and products. Ind-Ra believes CSB Bank 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. Profitability Adequate with Stable Asset Quality: CSB Bank’s earnings profile benefits from the significant contribution of its gold loan portfolio, which has a higher yield and constituted about 54% of the total advances as of 1QFY27. Given its established franchise and expertise in this segment, coupled with prudent risk management controls such as loan-to-value monitoring, the bank has maintained a favourable risk-adjusted return profile. CSB Bank’s operating metrics remained steady in FY26, supported by stable yields and loan book growth, particularly in the gold and corporate loan segments. Accordingly, the bank’s pre-provisioning operating profit grew 19.3% yoy in FY26. However, the increased cost of borrowings, particularly in bulk term deposits (TD) and foreign currencies with high interest rates, to fund advance growth have led to margin compression. The bank has recently been rebalancing its portfolio by increasing exposure to corporate loans, which typically offer lower yields than gold loans, suppressing margins. However, due to lower credit costs, CSB Bank managed to report a return on average risk-weighted assets (RORWA) of 2.83% in FY26 (FY25: 3.28%) and a return on average assets (ROA) of 1.29% (1.53%). The gross non-performing assets (NPAs) stood at 1.75% in 1QFY27 (FY26: 1.66%) and net NPAs at 0.39% (0.40%). The low net NPA level suggests minimal provisioning needs for legacy NPAs. The bank also had a contingent provision buffer of INR1.05 billion as of 1QFY27 accumulated through the bank's conservative and accelerated provisioning, and forms part of the overall excess provisions of INR1,980 million held above regulatory requirements. Overall, Ind-Ra expects CSB Bank’s asset quality to remain under control in the medium term, with steady gross and net NPAs. Moreover, the bank is likely to derive operating leverage benefits from investments in its technology infrastructure. Concentrated Geographical Profile; Diversification Underway: While CSB Bank continues to exhibit regional concentration, particularly in Kerala and Tamil Nadu, which accounted for 31% and 16% of its total branches in 1QFY27 (35% and 17% in FY24), this concentration is gradually declining. The share of advances from Kerala and Tamil Nadu reduced to 17% and 25% in 1QFY27 (FY24: 23% and 28%), respectively. A similar trend has been observed on the deposit side, with Kerala’ [Showing first 8,000 characters — download PDF for full document]