Public sector banks report strong growth and record profits in FY26

Public Sector Banks (PSBs) in India delivered strong financial performance in FY2025-26, driven by healthy business growth, improved asset quality, higher profitability and strong capital buffers, according to data released by the Ministry of Finance.

The combined business of PSBs rose 12.8% year-on-year to ₹283.3 lakh crore as of March 31, 2026. Aggregate deposits increased 10.6% to ₹156.3 lakh crore, reflecting steady depositor confidence and strong resource mobilisation. Gross advances grew 15.7% year-on-year to ₹127 lakh crore, indicating sustained credit demand across sectors of the economy.

Credit growth remained broad-based across the Retail, Agriculture and MSME (RAM) segments. Retail loans grew 18.1%, agriculture advances increased 15.5%, while MSME lending rose 18.2% during the year. The government said this highlights the important role played by PSBs in promoting entrepreneurship, financial inclusion and wider economic growth.

Asset quality also improved significantly during the year. The Gross Non-Performing Asset (NPA) ratio declined to 1.93%, while the Net NPA ratio fell to 0.39% as of March 2026, marking historically low levels of stressed assets. All PSBs maintained a provisioning coverage ratio above 90%, reflecting prudent risk management, stronger underwriting standards and improved balance sheet strength.

Fresh slippages continued to decline, with the slippage ratio reducing to 0.7% during FY26. Total recoveries, including recoveries from written-off accounts, stood at ₹86,971 crore, supported by improved recovery mechanisms and better credit discipline.

Improved asset quality, healthy credit expansion and higher income helped boost profitability. Aggregate operating profit of PSBs reached ₹3.21 lakh crore, while aggregate net profit rose 11.1% year-on-year to a record ₹1.98 lakh crore. This marks the fourth consecutive year of overall profitability for public sector banks.

The capital position of PSBs also remained strong. Aggregate Capital to Risk Weighted Assets Ratio (CRAR) improved to 16.6% as of March 31, 2026, well above the regulatory requirement of 11.5%. The improvement was supported by internal accruals, retained earnings and capital raising of ₹50,551 crore during the financial year.

Operational efficiency improved further, with the cost-to-income ratio easing to 49.67%, aided by better cost management and continued technology and digital transformation initiatives.

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