Public Sector Banks (PSBs) delivered a strong performance in FY 2025-26, reporting an all time high net profit of Rs 1.98 lakh crore. This marked the fourth straight year of profitability for state run banks, supported by strong loan growth, lower bad loans, and better operational efficiency.
The total business of PSBs rose 12.8% year on year to Rs 283.3 lakh crore as of March 31, 2026. Total deposits increased 10.6% to Rs 156.3 lakh crore, showing strong depositor confidence and steady resource mobilisation across the banking sector.
Gross advances of PSBs jumped 15.7% year on year to Rs 127 lakh crore. Credit demand remained strong across the economy, especially in Retail, Agriculture, and MSME segments. Retail advances grew 18.1%, agriculture loans increased 15.5%, and MSME advances rose 18.2% during FY26.
Asset quality improved sharply during the year. Gross NPA ratio declined to 1.93%, while Net NPA ratio fell to just 0.39% as of March 31, 2026. These are the lowest bad loan levels ever recorded by PSBs historically, reflecting stronger risk management and improved underwriting standards.
All PSBs maintained provisioning coverage ratios above 90%, showing prudent provisioning practices and stronger balance sheet resilience. Fresh slippages also reduced further, with the slippage ratio falling to 0.7% during FY26.
Recovery performance remained strong as total recoveries, including written off accounts, stood at Rs 86,971 crore. Improved recovery systems and better credit discipline helped banks reduce stressed assets and improve overall financial stability.
Aggregate operating profit of PSBs reached Rs 3.21 lakh crore in FY26. Higher income, better asset quality, and healthy credit growth supported the strong earnings performance across public sector banks.
The capital position of PSBs also stayed strong during the year. Aggregate CRAR improved to 16.6% as of March 31, 2026, well above the regulatory requirement of 11.5%. Banks raised Rs 50,551 crore during FY26, while operational efficiency improved as the cost to income ratio declined to 49.67%, helped by technology adoption and digital transformation initiatives.
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