Mid-sized and large PSU banks are attracting increased attention on Dalal Street on account of their strong performance in the March 2026 quarter, and valuations that are far more reasonable than the largest PSU bank, State Bank of India (SBI).
Valuation gap – PSU banks versus the largest PSU, SBI
To find the cheapest PSU banks, we dug dipper – we looked at the valuation matrix – price-to- (standalone)- book value (P/B ratio). This is what we came up with – Bank of India trades at a P/B of just 0.7 times, according to Screener.in, while Punjab National Bank (PNB) and Central Bank of India both trade at 0.8 times.
On the other hand, the largest PSU bank, State Bank of India (SBI), trades at 1.6 times.
| Bank | Price-to-(standalone) – book value |
| Bank of India | 0.7 times |
| Punjab National Bank | 0.8 times |
| Central Bank of India | 0.8 times |
| SBI | 1.6 times |
Performance in the March 2026 quarter – once again strong growth in high-margin retail and SME loans
Let’s focus our attention on these three cheapest PSU banks.
Growth in advances and deposits – core banking operations
Coming to the performance of these three PSU banks and how well they grew their core banking operations.…
Bank of India grew its loans / advances by 17.1% y-oy to Rs 7.6 lakh crore in the March 2026 quarter, and that was thanks to a 21.2% y-o-y growth in retail loans and 17.7% growth in SME loans.
The March quarter is typically a ‘busy’ season for credit, with individuals, small and large companies borrowing funds heavily before the close of the financial year.
Meanwhile, Punjab National Bank (PNB) grew its loans / advances by 13.7% y-o-y to Rs 12.25 lakh crore in the March 2026 quarter, and that was also thanks to an 18.2% y-o-y growth in retail loans.
And Central Bank of India, grew its loans / advances by 19.1% y-o-y to Rs 3.36 lakh crore in the March 2026 quarter, and the bank has highlighted a 25.7% y-o-y growth in retail loans in the quarter under review.
For perspective, SBI grew its advances by 17.2% y-o-y to Rs 48.77 lakh crore in the March 2026 quarter. To the largest bank’s credit, it had grown its SME loans by 21% y-o-y in Q4FY26 while agri loans grew 19.7%.
Performance of Bank of India, Central Bank of India and PNB versus SBI during Q4FY26
| Loan growth (% change y-o-y) | Deposit growth (% change y-o-y) | Net Interest Margin (NIM) in % | Growth in profit from ordinary activities before tax (% change y-o-y) | Net profit growth (% change y-o-y) | |
| Bank of India | 17.1% | 13.6% | 2.6% | 13.8% | 14.9% |
| Punjab National Bank | 13.7% | 9.3% | 2.6% | 10.3% | 14.4% |
| Central Bank of India | 19.1% | 13.3% | 3.25% | 37.4% | -30% |
| SBI | 17.2% | 11% | 2.93% | Flat | 5.6% |
Of equal importance, Bank of India grew its deposits by 13.6% y-o-y to 9.27 lakh crore in the March 2026 quarter, and that was thanks to a strong growth in time deposits, largely fixed deposits.
Deposits form the basis of extending credit for a bank, short and long-term to clients.
Meanwhile, PNB grew its deposits by 9.3% y-o-y to Rs 17.11 lakh crore in Q4FY26, and that was also thanks to strong growth in time deposits.
And Central Bank of India’s deposits grew 13.3% y-o-y to Rs 4.67 lakh crore in Q4FY26, and the bank has highlighted strong growth in time deposits.
For perspective, SBI’s deposits grew 11% y-o-y to Rs 59.75 lakh crore in Q4FY26, and it has also highlighted strong growth in time deposits.
Managing the NIM pressure in March 2026 quarter
The net interest margin (NIM) is a closely tracked operational parameter of banks. The NIM has been under pressure with the RBI cutting repo rates in early December 2025, as part of several steps taken by the central bank to reduce lending rates in the broader banking system. This has created temporary pressure on NIMs of banks.
To Bank of India’s credit, its NIM was broadly flat thanks to strong growth in retail – its NIM was 2.6% in March 2026 quarterly and broadly similar to a year earlier.
For Central Bank of India too, its NIM was 3.25% in the March 2026 quarter and broadly flat from a year earlier.
However, for PNB, its domestic NIM was 2.6% in the March 2026 quarter as against 2.96% a year earlier.
For perspective, for SBI, in its key domestic operations, its NIM was 2.93% in the March 2026 quarter as against 3.14% a year earlier.
Asset quality remains strong for PSU banks and net profit growth in Q4FY26
The Middle East crisis has not yet showed an impact in the performance of PSU banks in the March 2026 quarter, in terms of a rise in NPAs.
For instance, Bank of India’s percentage of net NPAs was 0.56% in the March 2026 quarter as against 0.82% a year earlier.
Also, its provisions for NPAs were Rs 1,210.7 crore in the March 2026 quarter, a decline of nearly 11% y-o-y.
As a result, Bank of India’s standalone net profit grew 14.9% y-o-y to Rs 3,015.8 crore in the March 2026 quarter.
Meanwhile, for PNB, its % of Net NPAs, was 0.29% in the March 2026 quarter as against 0.4% a year earlier.
However, its provisions for NPAs were Rs 906 crore in Q4FY26 as against Rs 588.3 crore a year earlier. PNB has highlighted its provision coverage ratio (PCR)was 90.3% in QFY26, broadly similar to the levels a year earlier.
PNB’s provisioning in the March 2026 quarter is well above regulatory requirements.
And despite higher provisions for NPAs in Q4FY26, PNB’s standalone net profit grew 14.4% y-o-y to Rs 5,225 crore in the March 2026 quarter.
The standalone quarterly results of Bank of India and PNB reflect their core banking operations.
One-time tax charge hits Central Bank of India’s net profit in Q4FY26
For Central Bank of India too – it had a high-quality loan book. Its % of net non-performing assets was 0.49% in the March 2026 quarter as against 0.55% a year earlier.
Its provisions for NPAs also fell nearly 22% y-o-y to Rs 646.7 crore in the March 2026 quarter.
As a result, its profit from ordinary activities before taxes rose 37.4% y-o-y to Rs 1,591.8 crore in Q4FY26.
However, the Mumbai-based bank has highlighted that in FY27 it will shift to the new tax system, and it has taken a one-time charge of Rs 632.39 crore related to net deferred tax assets in the March 2026 quarter. As a result, its tax expenses were Rs 867.4 crore in the March 2026 quarter as against Rs 124.9 crore a year.
A higher tax burden resulted in Central Bank of India’s standalone net profit declining nearly 30% y-o-y to Rs 724.4 crore in the March 2026 quarter.
The standalone quarterly results of Central Bank of India reflect its core banking operations.
Return on Assets (RoA) – which PSU bank uses capital most efficiently
For Bank of India, its Return on Assets (annualised) was 1.01% for the fourth quarter of FY26, and it was 0.93% for FY26.
Meanwhile, for PNB, its return on assets (annualised) was 1.06% in the March 2026 quarter, and it was 0.89% for FY26.
And for Central Bank of India, its return on assets (annualised) was 0.56% in the March 2026 quarter, and it was 0.89% for FY26.
For perspective, SBI has highlighted its return on assets (net asset basis – annualised) was 1.07% in Q4FY26, and it was 1.12% for FY26.
Return on Assets (Annualised): How the Banks Fare
| Bank | Q4 FY26 | FY26 |
| Bank of India | 1.01% | 0.93% |
| Punjab National Bank (PNB) | 1.06% | 0.89% |
| Central Bank of India | 0.56% | 0.89% |
| State Bank of India (SBI) | 1.07% | 1.12% |
Growth outlook for PSU banks
Investors on Dalal Street will continue to monitor Bank of India, PNB, Central Bank of India, SBI and other leading banks on key operational parameters, going forward – deposit and loan growth, NIM and level of NPAs. The RBI over the past several quarters has taken steps to boost lending in the broader banking system.
Investors are also awaiting a long-term truce in the Middle East war, and the current crisis has led to shortage of various petroleum products in the country. Various rating agencies have also downgraded India’s growth forecast to 6% – 6.5% for FY27.
Meanwhile, PNB has guided for loan growth of 12-13% y-o-y during FY27. PNB had grown its loans by 13.7% during FY26. It has also guided for NIM of 2.6% to 2.7% for FY27.
Valuations – Is it worth adding Bank of India, PNB and SBI to your watchlist
The three PSU banks trade at valuations much lower than SBI, the largest PSU bank. In fact, among all PSU banks, these three are the cheapest on the price to book value metric. Bank of India lost 2.9% to Rs 138 on Monday. Bank of India trades on the preferred valuation matrix – price-to- (standalone)- book value of 0.7 times. Over the past 5 years, it has traded on this valuation matrix between 0.3 times and 0.9 times.
Meanwhile, PNB lost 2.2% to Rs 100 on Monday. PNB trades on the valuation matrix at 0.8 times. Over the past 5 years, it has traded on this valuation matrix between 0.3 times and 1.5 times.
And Central Bank of India declined 0.7% to Rs 33.9 on Monday. It trades on the valuation matrix at 0.8 times. Over the past 5 years, it has traded on this valuation matrix between 0.3 times and 2 times.
SBI lost 2.5% to Rs 939 on Monday. The largest PSU bank, SBI trades on the valuation matrix at 1.6 times. Over the past five years, it has traded on the valuation matrix between 1.3 and 2.3 times.
Readers can put Bank of India, PNB and Central Bank of India on their watch list of stocks for 2026, and see if the performance of these PSU banks matches investor expectations.
Disclaimer
Amriteshwar Mathur is a financial journalist with over 20 years of experience. The writer and his family have no shareholding in any of the stocks mentioned in the article. Disclaimer: The website managers, its employee(s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers/authors. Investors must make their own investment decisions based on their specific objectives, resources and only after consulting such independent advisors as may be necessary.