PSU banks post record ₹1.98 lakh crore profit in FY26; bad loans fall to all-time low

Public sector banks (PSBs) posted a record net profit of ₹1.98 lakh crore in 2025-26, marking the fourth consecutive year of aggregate profitability, the finance ministry said on Tuesday.

The aggregate net profit of state-owned banks rose 11.1% year-on-year during the financial year ended March 31, 2026, driven by healthy credit growth, improved asset quality and higher income.

"Public Sector Banks continued to register strong financial performance during FY 2025-26, reflecting sustained business growth, improved asset quality, record profitability and strong capital position," the ministry said in a statement.

The ministry said the gross non-performing asset (NPA) ratio of PSBs declined to a historic low of 1.93% as of March 31, 2026, from 2.58% a year ago. Net NPAs fell to 0.39%, the lowest level on record.

Aggregate business of PSBs grew 12.8% year-on-year to ₹283.3 lakh crore at the end of March 2026.

Deposits increased 10.6% to ₹156.3 lakh crore, while gross advances rose 15.7% to ₹127 lakh crore.

Retail advances rose 18.1%, agriculture loans increased 15.5% and lending to micro, small and medium enterprises grew 18.2% during the year.

The ministry said fresh slippages continued to decline, with the slippage ratio easing to 0.7% in 2025-26.

Total recoveries, including recoveries from written-off accounts, stood at ₹86,971 crore.

Aggregate operating profit of PSBs rose to ₹3.21 lakh crore during the year.

The capital position of public sector banks remained strong, with aggregate capital to risk-weighted assets ratio (CRAR) improving to 16.6% as of March 31, 2026, well above the regulatory requirement of 11.5%.

The ministry said the stronger capital base was supported by internal accruals, retained earnings and capital raising of ₹50,551 crore during the year.

Operational efficiency also improved, with the cost-to-income ratio declining to 49.67%, aided by better cost management and gains from technology adoption and digital transformation initiatives.

"Today, PSBs are well-capitalised, profitable and institutionally stronger, enabling them to effectively support India's growth aspirations and contribute meaningfully towards the vision of Viksit Bharat by 2047," it said.