Public sector banks profit hits ₹1.98 lakh cr in FY26

Record year for PSBs, finance ministry says

India’s public sector banks (PSBs) reported their highest-ever combined net profit in FY 2025-26, extending a multi-year turnaround in profitability. The finance ministry said PSBs delivered an all-time high aggregate net profit of ₹1.98 lakh crore in FY26, marking the fourth straight year of profitability. The FY26 outcome also reflected stronger operating performance and improving balance-sheet indicators cited in official releases.

The profit milestone comes at a time when the broader banking system has also shown strong earnings momentum. Separate sector updates referenced that scheduled commercial banks (SCBs) crossed the ₹1 lakh crore quarterly net profit mark for the first time in Q3 FY26. Within that mix, PSBs outperformed private banks on profit growth in the quarter, as per a CareEdge Ratings report mentioned in the source material.

FY26 headline numbers: operating profit and net profit

For FY26, PSBs reported aggregate operating profit of ₹3.21 lakh crore. Aggregate net profit rose 11.1% year-on-year to ₹1,98,210 crore, described as a historic high for the PSB system. The ministry’s communication positioned FY26 as a continuation of improving fundamentals, with better lending discipline and sustained reform efforts supporting outcomes.

While the dataset shared does not provide bank-wise FY26 full-year splits, it highlights the system-level step-up in earnings. The operating profit figure is relevant because it captures core profitability before provisions and taxes, often used to track how much earnings capacity banks have to absorb credit costs. A higher operating profit, along with improving asset quality metrics mentioned in the updates, typically supports resilience across cycles.

Five-year profitability trajectory shows sharp rise

The profit progression over the last five years underscores the scale of the improvement. PSBs’ aggregate net profit increased from ₹66,543 crore in FY22 to ₹1,04,649 crore in FY23, then ₹1,41,202 crore in FY24 and ₹1,78,364 crore in FY25. FY26 then set a new peak at ₹1,98,210 crore.

This sequence is important because it shows the turnaround is not limited to a single period. The fourth consecutive year of profitability signals that the sector’s recovery has sustained through multiple reporting cycles. The official narrative ties this to stronger balance sheets and healthier lending practices, though the text does not provide detailed drivers such as fee income trends or net interest margin changes.

Q3 FY26: quarterly record profit for PSBs

In the third quarter of FY26, PSBs posted a record cumulative profit of ₹52,603 crore, an 18% year-on-year growth, based on stock exchange disclosures cited in reports. The December-quarter comparison provided was ₹44,473 crore for Q3 FY25, implying an absolute increase of ₹8,130 crore in the latest quarter.

Quarterly numbers also show that profits stayed elevated across FY26 so far. PSBs recorded ₹44,218 crore of profit in Q1 FY26 and ₹49,456 crore in Q2 FY26 (reported as a 9% annual increase for that quarter). Taken together, these quarterly updates point to consistency in earnings rather than a one-off spike.

Nine months to December 2025: aggregate profits cross ₹1.45 lakh crore

For the nine months ended December 2025, aggregate PSB profits crossed ₹1.45 lakh crore for the first time, reaching ₹1,46,277 crore. This compared with ₹1,29,994 crore in the April-December period of FY25, representing nearly 13% growth.

This 9M performance was used by policymakers to express confidence about full-year outcomes. Financial Services Secretary M Nagaraju said he expected combined PSB profit to cross ₹2 lakh crore in FY26, citing that the system had “already touched almost ₹1 lakh crore in the first half”, as referenced in the material.

SBI’s contribution and other banks’ profit growth

State Bank of India (SBI) was highlighted as the largest contributor to PSB profits in Q3 FY26. SBI reported a net profit of ₹21,028 crore in Q3 FY26, described as the bank’s highest-ever quarterly profit, and 24% higher than the year-ago period. Reports also noted SBI contributed about 40% of total PSB earnings in the quarter.

Among other PSBs, the information shared pointed to Indian Overseas Bank recording the highest percentage growth in net profit at 56% (the base profit number was not provided in the text). Other lenders cited with double-digit profit growth included Punjab and Sind Bank (19%), UCO Bank (16%), and Punjab National Bank (13%).

Asset quality and returns: metrics cited in updates

The dataset references a significant improvement in asset quality and profitability ratios. A CareEdge Ratings note cited that in Q3 FY26, SCBs’ annualised return on assets (RoA) improved by 1 basis point to 1.34%. For PSBs specifically, RoA was cited at 1.18%, up 7 basis points year-on-year, while remaining stable sequentially due to higher provisions and operating expenses.

An additional official comment said gross NPA was at a record low of 2.30% and net NPA at 3% at the end of September 2025. These were presented as evidence of improved loan book quality and reduced stress.

Funding and capital: bonds and QIP plans

The material also pointed to capital-raising activity. During 9M FY26, banks collectively raised more than ₹16,095 crore through bonds. Separately, public sector banks announced plans to raise ₹45,000 crore via qualified institutional placement (QIP) in FY26.

These funding plans matter for capital adequacy and the ability to support credit growth. The text does not detail which banks would raise funds or the timing of issuances, but the headline figures signal continued reliance on market instruments alongside internal accruals.

Credit and deposit growth signals steady demand

Financial Services Secretary Nagaraju said PSB credit growth was at 12% for the year, while deposit growth was at 10%. These figures were used to indicate that balance-sheet expansion is continuing in a relatively stable manner.

In the Q3 FY26 sector snapshot cited from CareEdge, PSBs were also described as leading private banks in profit growth. The report noted PSBs’ net profit rose 17.5% year-on-year to ₹55,000 crore in the quarter, while private sector banks’ net profit increased 3.2% to ₹45,000 crore.

Loan write-offs: large cumulative figure cited

One update included a separate disclosure that public banks have executed ₹6.15 lakh crore of loan write-offs over 5.5 years. The text does not break this down bank-wise or year-wise, but the figure is significant and often discussed in the context of resolution processes, recoveries, and provisioning practices.

Write-offs, by themselves, do not necessarily indicate the final loss outcome because recoveries can occur after write-off. However, no recovery figures were provided in the supplied material, so the dataset should be read as a headline cumulative disclosure rather than a net loss measure.

Key numbers at a glance

Why the FY26 PSB numbers matter

The FY26 record profit of ₹1,98,210 crore is a marker of how far PSBs have moved from the period when weak asset quality and heavy provisioning constrained earnings. The multi-year climb from ₹66,543 crore in FY22 to nearly ₹2 lakh crore in FY26 provides an evidence-backed narrative of sustained improvement in system-level profitability.

The data points on RoA, NPA metrics, and capital-raising plans provide additional context for investors and policy watchers. Higher operating profit and healthier asset quality create room for credit expansion while maintaining buffers for provisions, as implied by the discussion around higher expenses and provisions limiting sequential RoA gains in Q3 FY26.

What to watch next

Several forward references in the material point to the next set of signposts. One is whether full-year FY26 profits cross the ₹2 lakh crore level, as repeatedly indicated by the Financial Services Secretary. Another is how the planned ₹45,000 crore of QIP fundraising is executed and whether it meaningfully changes capital ratios and lending capacity.

For quarterly monitoring, investors will likely track whether PSBs can sustain the pace seen in FY26 so far, especially after the Q3 profit milestone and the strong nine-month run-rate. Additional disclosures on asset quality, provisioning, and credit growth in subsequent quarters will be key to validating the trend described in these updates.