Public Sector Banks reported a record net profit of ₹1.98 lakh crore in FY26, while gross NPAs declined to a historic low of 1.9%. Strong credit growth, higher deposits and improved capital adequacy reflected the sector's continued financial strength.
The Public Sector Banks (PSBs), where the government has a majority shareholding, finished FY26 with the best performance in years. According to the Ministry of Finance’s report based on RBI figures, the combined net profits of the PSBs were the highest ever, their GNPAs were at a historic low, and their total business was higher than ₹283 lakh crore.
Record Profits And Strong Business Growth
Net profit for PSBs was ₹1.98 lakh crore in FY26 compared to ₹1.78 lakh crore in FY25, an increase of 11.2%. This is the highest net profit ever achieved by the public sector banking industry in India.
The aggregate business, which includes deposits and advances, has grown by 12.6% from ₹251.7 lakh crore in 2025 to ₹283.3 lakh crore as on March 31, 2026. The total deposits were up 10.1% to ₹156.3 lakh crore, whereas the total loans & advances grew 15.7% to ₹127 lakh crore.
PSB Financial Performance: Five-Year Overview (₹ in lakh crore)
| Financial Parameter | FY22 | FY23 | FY24 | FY25 | FY26 |
| Total Business | 181.5 | 203.2 | 226.7 | 251.7 | 283.3 |
| Total Deposits | 107.2 | 117.1 | 129 | 142 | 156.3 |
| Total Loans & Advances | 74.3 | 86.1 | 97.7 | 109.8 | 127 |
| Net Profit | 0.67 | 1.05 | 1.41 | 1.78 | 1.98 |
| Gross NPAs (%) | 7.3 | 5 | 3.5 | 2.6 | 1.9 |
| Capital Adequacy – CRAR (%) | 14.6 | 15.5 | 15.6 | 16.1 | 16.6 |
Bad Loans At Their Lowest In Recent Memory
There was considerable progress on asset quality in FY26 for PSBs. The gross non-performing asset ratio was 1.9% at the end of March 2026, down from 2.6% in FY25 and 7.3% in FY22, which is the lowest in decades.
The Capital Adequacy Ratio (CRAR) is up by 16.6% as against 16.1% in the previous year, suggesting that PSBs continue to keep adequate capital to meet credit growth in the coming years.
Credit Growth Broad-Based Across Sectors
Credit growth was diversified across various sectors of the economy. Credit to MSME sector saw growth of 19.6%, which was the highest for all major sectors, followed by retail lending at 19.8%.
Loans for agriculture and ancillary activities increased by 16.2%, having seen a growth of just 9.8% in the previous fiscal year. Loans for infrastructure saw a growth rate of 4.9%, an improvement over 2.2% last year.
PSB Sector-Wise Credit Growth YoY (in %)
| Credit Segment | FY22 | FY23 | FY24 | FY25 | FY26 |
| Retail Loans | 12.9 | 20.2 | 12.6 | 17.7 | 19.8 |
| Agriculture & Allied Activities | 6.7 | 18.8 | 16.9 | 9.8 | 16.2 |
| MSME Loans | -1.7 | 9 | 11 | 9.8 | 19.6 |
| Infrastructure Loans* | -14.7 | 33.7 | 5.9 | 2.2 | 4.9 |
Government Launches ECLGS 5.0
In May 2026, the Government introduced the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0 to support businesses facing liquidity stress arising from the West Asia crisis.
The scheme offers 100% guarantee coverage to MSMEs and 90% guarantee coverage to eligible non-MSMEs and scheduled passenger airlines. The overall credit limit under the scheme is limited to ₹2,55,000 crore, out of which ₹5,000 crore is allocated for the aviation industry.
Eligible airlines can avail loans of up to 100% of their peak outstanding credit during the January-March 2026 quarter, subject to a maximum of ₹1,500 crore per borrower. Loans above ₹1,000 crore require proportionate equity contribution from promoters. The details were provided by Minister of State for Finance Shri Pankaj Chaudhary in a written reply in the Rajya Sabha.
Also Read About: PSU Mutual Funds and Debt Banking
Conclusion
The FY26 performance has shown the steady turnaround in the banking industry of India’s public sector. It is evident from high profits, low NPAs, enhanced capital levels, and credit growth. In addition, with the introduction of ECLGS 5.0, the numbers show that PSBs continue to play an integral part in the government’s strategy for economic growth and stability.
