Public Sector Banks (PSBs) delivered a record-breaking financial performance in FY 2025–26, posting their highest-ever combined net profit of ₹1.98 lakh crore while sharply improving asset quality and expanding credit growth across key sectors of the economy.

Data released by the Finance Ministry showed that PSBs registered their fourth consecutive year of profitability, reflecting stronger balance sheets, healthier lending practices and sustained reforms in the banking sector.

The total business of PSBs rose to ₹283.29 lakh crore in FY26, compared with ₹251.74 lakh crore in FY25, continuing a strong multi-year growth trend. The banking sector’s total business has steadily climbed from ₹181.50 lakh crore in FY22, highlighting robust expansion in deposits and lending activities.

Aggregate deposits increased 10.6% year-on-year to ₹156.3 lakh crore, while gross advances surged 15.7% to ₹127 lakh crore as of March 31, 2026.

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Retail, agriculture and MSME

Credit growth remained broad-based across Retail, Agriculture and MSME (RAM) segments during FY26.

Retail advances grew 18.1% year-on-year, agriculture loans rose 15.5%, while MSME lending expanded 18.2%, underlining the critical role PSBs continue to play in supporting entrepreneurship, financial inclusion and economic growth.

The Finance Ministry said the improved performance demonstrates the “resilience, stability and enhanced institutional capacity” of public sector lenders in supporting the credit requirements of a rapidly growing Indian economy.

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Asset quality improves

PSBs also achieved their best-ever asset quality performance during FY26.

The Gross NPA ratio declined to 1.93%, while the Net NPA ratio dropped to just 0.39% as of March 31, 2026 — the lowest levels recorded historically.

The improvement marks a dramatic turnaround from earlier years when stressed assets had severely impacted the banking system. Gross NPAs had peaked at 14.58% in FY18, while Net NPAs stood at 7.97% during the same period.

Fresh slippages reduced further during FY26, with the slippage ratio declining to 0.7%. Total recoveries, including written-off accounts, stood at ₹86,971 crore.

All PSBs maintained provisioning coverage ratios above 90%, indicating stronger risk management practices and prudent provisioning standards.

Profitability and capital position

Aggregate operating profit of PSBs reached ₹3.21 lakh crore during FY26, while net profit rose 11.1% year-on-year to ₹1,98,210 crore.

The profitability trajectory has remained strong over the last five years. Net profit increased from ₹66,543 crore in FY22 to ₹1,04,649 crore in FY23, ₹1,41,202 crore in FY24 and ₹1,78,364 crore in FY25 before touching a record high in FY26.

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The capital position of PSBs also remained comfortable, with aggregate Capital to Risk (Weighted) Assets Ratio (CRAR) improving to 16.6%, well above the regulatory requirement of 11.5%.

According to the government, continued reforms, stronger governance standards, digital transformation initiatives and better credit discipline have helped make PSBs well-capitalised, profitable and institutionally stronger.

Published on: May 12, 2026 4:15 PM IST