Public sector banks post record ₹1.98 lakh crore profit in FY26, NPAs at all-time low

India's public sector banks have delivered their strongest-ever financial performance, posting a record aggregate net profit of ₹1.98 lakh crore in FY26 — up 11.1% year-on-year — marking the fourth consecutive year of profitability for the state-owned lenders, the ministry of finance said on Tuesday.

Record profitability

Aggregate operating profit of PSBs reached ₹3.21 lakh crore during the year. The ministry attributed the performance to a combination of improved asset quality, healthy credit expansion and higher income. "Improved asset quality, healthy credit expansion and higher income contributed to improved profitability of PSBs during FY 2025–26," the PIB release said.

Cleanest books ever

Asset quality hit historically clean levels, with the gross NPA ratio falling to 1.93% and the net NPA ratio declining to 0.39% as of March 31, 2026 — both the lowest levels ever recorded. Every PSB maintained a provisioning coverage ratio above 90%. Fresh slippages continued to shrink, with the slippage ratio declining to 0.7%, while total recoveries — including from written-off accounts — stood at ₹86,971 crore. The ministry described the numbers as "reflecting historically low levels of stressed assets" and pointing to "improved recovery mechanisms and better credit discipline across PSBs."

Business momentum

Total business of PSBs rose 12.8% year-on-year to ₹283.3 lakh crore. Aggregate deposits grew 10.6% to ₹156.3 lakh crore, "reflecting continued depositor confidence and strong resource mobilisation by PSBs." Gross advances surged 15.7% to ₹127 lakh crore. Credit growth was broad-based — retail advances grew 18.1%, MSME advances rose 18.2%, and agriculture advances were up 15.5%, "reflecting the important role of PSBs in supporting entrepreneurship, strengthening financial inclusion, and enabling broad-based economic growth," the ministry said.

Well capitalised

The aggregate capital to risk-weighted assets (CASA) ratio improved to 16.6% — well above the regulatory minimum of 11.5% — supported by internal accruals and capital raising of ₹50,551 crore during the year. Operational efficiency also improved, with the cost-to-income ratio tightening to 49.67%, aided by technology adoption and digital transformation initiatives.

The ministry said the turnaround reflects "the resilience of the Indian economy and the Government's sustained reforms aimed at strengthening the banking sector through improved governance, technology adoption, enhanced credit discipline and wider access to formal credit," adding that "today, PSBs are well-capitalised, profitable and institutionally stronger."