Public Sector Banks Net Profit Hits Record ₹1.98 Lakh Crore in FY26: Finance Ministry

Public Sector Banks (PSBs) recorded a combined net profit of ₹1.98 lakh crore in FY2025-26, according to data released by the Finance Ministry.  

Profit After Tax (PAT) rose 11.1% from the previous financial year, making FY26 the 4th consecutive year of overall profitability for state-run banks. 

Aggregate operating profit during the year stood at ₹3.21 lakh crore. The rise in earnings came alongside lower bad loans and continued growth in lending activity across segments. 

Bad Loan Ratios Decline Further 

Asset quality indicators improved during FY26, with gross non-performing assets (NPAs) declining to 1.93% as of March 31, 2026. Net NPAs fell to 0.39%, the lowest level reported by PSBs so far. 

The slippage ratio, which measures fresh additions to bad loans, declined to 0.7% during the year. Banks also maintained provisioning coverage ratios above 90%, indicating higher buffers against stressed assets. 

Recoveries, including those from written-off accounts, stood at ₹86,971 crore in FY26. The Finance Ministry said improvements in underwriting standards and recovery mechanisms contributed to lower stressed asset levels. 

Business Growth Remains Steady 

The combined business of PSBs rose 12.8% year-on-year to ₹283.3 lakh crore by the end of FY26. Aggregate deposits increased to ₹156.3 lakh crore, up 10.6% from a year earlier. 

Gross advances grew 15.7% year-on-year to ₹127 lakh crore. Lending growth remained broad-based across retail, agriculture, and MSME segments. 

Retail advances increased 18.1% during the year, while agriculture loans rose 15.5%. MSME lending recorded growth of 18.2%, showing continued credit demand from small businesses and individual borrowers. 

Capital Position Improves 

The aggregate capital adequacy ratio of PSBs improved to 16.6% as of March 31, 2026, remaining above the regulatory requirement of 11.5%. 

During the financial year, PSBs raised ₹50,551 crore through capital raising and internal accruals. The sector’s cost-to-income ratio improved to 49.67%, indicative of lower operating costs relative to income. 

The Finance Ministry said governance measures, digital processes and balance sheet clean-up efforts contributed to financial performance and stress levels across public sector banks in FY26. 

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Conclusion  

State-run banks reported growth across lending segments in FY26, while bad loan ratios declined to record low levels and profitability remained strong. 

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