Public sector banks hit record FY26 profit: ₹1.98 lakh cr

Record profitability for the fourth straight year

India’s public sector banks (PSBs) posted an all-time high aggregate net profit of ₹198,000 crore in FY2025-26, according to a statement by the Ministry of Finance. The result marked the fourth consecutive year of aggregate profitability for the state-owned banking system. The ministry attributed the improvement to better asset quality, healthy credit expansion, and higher income.

The FY26 performance is being tracked closely because PSBs together account for a large share of India’s deposit base and credit flow. The finance ministry also highlighted that PSBs continued to register strong financial performance during FY26, reflecting sustained business growth, record profitability, and a strong capital position.

Key numbers from the Finance Ministry statement

The ministry said aggregate operating profit for PSBs reached ₹321,000 crore in FY26. Aggregate net profit rose 11.1% year-on-year to the record ₹198,000 crore. Another figure cited in reports pegged the year-on-year increase at 11.2%, with net profit described as roughly ₹1.98 trillion, which is equivalent to ₹198,000 crore.

The FY26 result also came alongside growth in business volumes. Aggregate business increased to ₹28,330,000 crore as on March 31, 2026, showing 12.8% growth over the previous year. Deposits and advances expanded at double-digit rates, indicating continued activity across borrowers and depositors.

Credit growth and business expansion

PSBs reported aggregate deposits of ₹15,630,000 crore in FY26, up 10.6% year-on-year. The ministry said this reflected continued depositor confidence and strong resource mobilisation.

On the lending side, gross advances stood at ₹12,700,000 crore, up 15.7% year-on-year. The finance ministry linked the profitability improvement to healthy credit expansion and higher income, alongside improved asset quality.

Operating profit provides a stronger earnings buffer

Operating profit of ₹321,000 crore is a key indicator because it reflects banks’ pre-provision operating performance. A higher operating profit typically gives banks more capacity to absorb credit costs and support internal capital generation.

While the ministry statement did not provide provisioning or NPA ratios in the excerpted data, it explicitly connected FY26 profitability to improved asset quality. That connection matters because it suggests that the earnings uplift was not only from balance-sheet growth, but also from reduced stress and better recovery dynamics.

How FY26 compares with prior years

The record FY26 net profit builds on a multi-year improvement in aggregate profitability. PSBs reported net profits of ₹178,000 crore in FY25 and ₹141,000 crore in FY24. Net profit was ₹104,000 crore in FY23 and ₹66,543 crore in FY22.

This sequence shows a steady rise over four years, culminating in the FY26 peak. The ministry described FY26 as a defining milestone for the public sector banking system, following years when elevated bad loans and weaker balance sheets had weighed on the sector.

Bank-level highlights: SBI, Bank of Baroda, and PNB

Within the PSB universe of 12 state-owned banks, some of the largest lenders reported notable FY26 results. State Bank of India (SBI) posted its highest-ever annual net profit of ₹80,032 crore in FY26, up 12.9% year-on-year.

Bank of Baroda reported an FY26 profit of ₹20,021 crore. Punjab National Bank reported a net profit of ₹16,904 crore in FY26. These numbers underscore that the aggregate performance was supported by contributions from large lenders as well.

Snapshot table: FY26 headline metrics

Profit trend table: FY22 to FY26

Market impact: why these numbers matter for investors

For equity investors tracking the banking sector, higher and more consistent profitability at PSBs can signal stronger operating momentum and improved resilience. The ministry specifically pointed to improved asset quality and strong capital position, which are closely watched indicators for downside risk in lenders.

The FY26 data also highlights strong credit demand, with gross advances rising 15.7% year-on-year and deposits up 10.6%. From a system standpoint, this combination suggests that PSBs remained active in extending credit while still growing their funding base.

Analysis: the drivers behind the FY26 profit peak

The finance ministry attributed the FY26 record to three factors: improved asset quality, healthy credit expansion, and higher income. The rise in operating profit to ₹321,000 crore is consistent with better operating efficiency and stronger core earnings, though the statement does not break down income components.

The fourth consecutive year of aggregate profitability is also significant because it indicates that the turnaround is not a one-off outcome. The profit trend from FY22 to FY26 shows steady gains, culminating in a record year.

What to watch next

The finance ministry’s statement positions FY26 as a high-water mark for PSBs on profitability and business growth. Next, investors are likely to track whether the pace of credit growth and deposit mobilisation sustains, and whether asset quality improvements continue to support earnings.

For now, the confirmed FY26 numbers place PSBs at a record profit of ₹198,000 crore, backed by ₹321,000 crore operating profit and double-digit growth in business, deposits, and advances.