PSU Banks soar: After strong earnings growth in Q3; the FY26 profit is expected to cross ₹2 lakh crore

Shares of public sector banks are among the top sectoral gainers after the State Bank of India posted strong quarterly earnings on Saturday. Shares of State Bank of India hit new record high levels by jumping 7.4% on Monday. The sentiment also improved for other PSU banks like Indian Bank (+3.55%), Bank of India (+2.9%), Indian Overseas Bank (+2.3%) and other banks like Canara Bank, Punjab National Bank, Union Bank, Bank of Baroda rallied up to 2%. Considering the overall growth in PSU Banks, with stable asset quality and improved return ratios, the PSU bank’s overall health is showing signs of strong health.

As public sector banks (PSBs) continue to demonstrate resilience and strong asset quality improvement, Financial Services Secretary M Nagaraju has expressed confidence that the combined profit of these banks is expected to cross the landmark ₹2 lakh crore mark at the end of the ongoing financial year (FY26). Emphasising that the Indian banking sector is in good shape, he said PSBs’ credit growth is at 12% this year, which he described as tremendously good, while deposit growth at 10% is also reasonably very good.

He said, ‘As I said, banks are at the bellwether for the strength of the economy. Therefore, they are resilient. We have very prudent management systems in place under the regulator, RBI. So we are not much worried about the external facto₹negatively impacting our banking sector.’ He noted that the combined profit of PSBs would double in three years. The FY25 closed with PSU banks posting a record profit of ₹1.78 lakh crore, up from ₹1.41 lakh crore in FY24, a 26 % growth, on account of significant improvement in asset quality, credit growth, healthy capital adequacy ratio and rising return on assets.

Talking about the asset quality of PSBs, he said gross NPA is at a record low of 2.30 % and net NPA at 3% at the end of September 2025. Provisioning coverage ratio (PCR) improved to 94.63% at the end of September 2025, while the capital adequacy ratio of PSBs stood at 15.96% at the end of the first half of the current fiscal.