Public sector banks (PSBs) posted a record aggregate net profit of Rs 1.98 lakh crore in 2025-2, aided by robust credit growth, improved asset quality and stronger operational efficiency, finance ministry said on Tuesday.
The combined business of PSBs rose 12.8% on-year to Rs 283.3 lakh crore as on March 31, 2026. Aggregate deposits increased 10.6% to Rs 156.3 lakh crore, while gross advances grew 15.7% to Rs 127 lakh crore, reflecting sustained credit demand across sectors.
Retail, agriculture and MSME lending remained the key growth drivers during the year. Retail advances expanded 18.1%, agriculture loans rose 15.5% and MSME credit grew 18.2%, underlining the role of state-owned banks in supporting financial inclusion and economic activity.
Asset quality imporves sharply
Asset quality of PSBs improved sharply during the year, with the gross non-performing asset (NPA) ratio falling to a historic low of 1.93% and the net NPA ratio declining to 0.39% as of March-end 2026. Fresh slippages also moderated, with the slippage ratio easing to 0.7%.
Total recoveries, including from written-off accounts, stood at Rs 86,971 crore during the year. All PSBs maintained a provisioning coverage ratio above 90%, reflecting stronger risk management and prudent provisioning practices.
The capital position PSBs also remained comfortable, with the aggregate capital-to-risk weighted assets ratio (CRAR) improving to 16.6%, well above the regulatory requirement of 11.5%. PSBs raised Rs 50,551 crore during the year to support future lending growth.
The government said continued reforms, better governance standards, technology adoption and improved credit discipline had strengthened PSBs, enabling them to support India’s economic growth and the vision of “Viksit Bharat” by 2047.