India’s public sector banks delivered their strongest-ever annual performance in FY 2025-26, reporting a record aggregate net profit of Rs 1.98 lakh crore, marking the fourth consecutive year of profitability.
According to the Ministry of Finance, the performance was driven by steady credit growth, stronger asset quality, and higher income generation across the banking system. Aggregate operating profit for public sector banks stood at Rs 3.21 lakh crore during the fiscal year, while net profit rose 11.1 percent compared with the previous year.
The overall business of public sector banks expanded to Rs 283.3 lakh crore as of March 31, 2026, registering a 12.8 percent increase year-on-year. Deposits grew 10.6 percent to Rs 156.3 lakh crore, while gross advances rose 15.7 percent to Rs 127 lakh crore.
Loan growth remained broad-based across key sectors. Retail advances increased 18.1 percent, agriculture lending rose 15.5 percent, and credit to the MSME segment grew 18.2 percent during the year.
Asset quality continued to improve sharply. The gross non-performing asset (NPA) ratio declined to 1.93 percent by the end of March 2026, while the net NPA ratio fell further to 0.39 percent.
The finance ministry said all public sector banks maintained a provisioning coverage ratio of over 90 percent, strengthening their balance sheets against potential stress. “Improved asset quality, healthy credit expansion and higher income contributed to improved profitability of PSBs during FY 2025-26,” the ministry said.
Fresh stress also moderated during the year, with the slippage ratio falling to 0.7 percent. Total recoveries, including those from written-off accounts, stood at Rs 86,971 crore. Capital adequacy remained healthy, with the aggregate Capital to Risk Weighted Assets Ratio (CRAR) improving to 16.6 percent. This was supported by internal accruals, retained earnings, and capital raising worth Rs 50,551 crore during FY26.
Operational efficiency also improved, with the cost-to-income ratio easing to 49.67 percent, reflecting gains from tighter cost control and greater use of technology. According to the ministry, the continued strengthening of public sector banks reflects the impact of reforms aimed at improving governance, accelerating technology adoption, and expanding access to formal credit.
The ministry added that public sector banks are now better capitalised, more profitable, and institutionally stronger, positioning them to play a larger role in supporting India’s long-term economic growth and the broader Viksit Bharat 2047 vision.
