The net profit of public sector banks recorded a robust 11.1 per cent increase to scale an all-time high of INR 1.98 lakh crore in FY 2025–26
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NEW DELHI — The net profit of public sector banks recorded a robust 11.1 per cent increase to scale an all-time high of INR 1.98 lakh crore in FY 2025–26, marking the fourth straight year of profitability as reforms and strengthened governance practices have reinforced healthier balance sheets, enhanced operational resilience, and strong capital adequacy, the Finance Ministry said on Tuesday.
Improved asset quality, healthy credit expansion and higher income contributed to improved profitability of PSBs during FY 2025–26, a Finance Ministry statement said. The aggregate business of public sector banks (PSBs) increased to INR 283.3 lakh crore as on March 31, 2026, registering a growth of 12.8 per cent over the previous year, it said.
Asset quality of PSBs improved significantly during FY 2025–26, with Gross NPA ratio (Non-Performing Assets) declining to 1.93 per cent and Net NPA ratio to 0.39 per cent as on March 31, 2026, reflecting historically low levels of stressed assets. Further, each PSB maintained a provisioning coverage ratio of above 90 per cent, indicating prudent provisioning practices, improved underwriting standards, effective risk management mechanisms and strengthened balance sheet resilience, the statement added.
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Fresh slippages continued to decline during FY 2025–26, with the slippage ratio reducing to 0.7 per cent. Total recoveries, including recoveries from written-off accounts, stood at INR 86,971 crore, reflecting improved recovery mechanisms and better credit discipline across PSBs.
Aggregate deposits rose by 10.6 per cent year-on-year to INR 156.3 lakh crore, reflecting continued depositor confidence and strong resource mobilisation by PSBs. Gross advances registered growth of 15.7 per cent year-on-year to reach INR 127 lakh crore, indicating sustained credit demand across sectors of the economy, the statement said.
Public Sector Banks (PSBs) continued to register strong financial performance during FY 2025–26, reflecting sustained business growth, improved asset quality, record profitability and strong capital position. The improved performance demonstrates the resilience, stability and enhanced institutional capacity of PSBs in supporting the credit needs of a fast-growing Indian economy, the statement said.
Credit growth in the Retail, Agriculture and MSME (RAM) segments remained broad-based during FY 2025–26. Retail, Agriculture and MSME advances grew by 18.1 per cent, 15.5 per cent and 18.2 per cent, respectively, reflecting the important role of PSBs in supporting entrepreneurship, strengthening financial inclusion, and enabling broad-based economic growth.
The capital position of PSBs remained healthy, with aggregate CRAR (Capital to Risk (Weighted) Assets Ratio) improving to 16.6 per cent as on March 31, 2026, supported by internal accruals, retained earnings and capital raising of INR 50,551 crore during FY 2025–26. The CRAR of all PSBs remained well above the regulatory requirement of 11.5 per cent, providing an adequate cushion for continued lending growth.
Operational efficiency of PSBs also improved during the year, with the cost-to-income ratio improving to 49.67 per cent, reflecting better cost management and gains from technology adoption and digital transformation initiatives.
The continued improvement in the performance of PSBs reflects the resilience of the Indian economy and the government’s sustained reforms aimed at strengthening the banking sector through improved governance, technology adoption, enhanced credit discipline and wider access to formal credit. These measures have contributed to lower stressed assets, improved operational efficiency and stronger financial position of PSBs, the statement added.