Public Sector Banks Post Record Profit in FY26 as Bad Loans Fall to a Multi-Decade Low
The Union Ministry of Finance released data on the health of public sector banks (PSBs, the banks in which the government owns the majority stake).
PSBs earned a combined net profit of ₹1.98 lakh crore in 2025-26 (FY26), the highest ever. This was about 11% more than the ₹1.78 lakh crore earned in 2024-25.
Their gross NPA ratio (the share of loans that have stopped being repaid) fell to 1.93% on 31 March 2026, the lowest in several decades. The net NPA ratio fell to 0.39%.
The total business of PSBs (deposits plus loans) reached about ₹283 lakh crore.
The ministry linked the turnaround to government steps and banking reforms over the past decade, such as cleaning up bad loans, putting fresh capital into banks and the EASE reform agenda.
It also listed financial inclusion figures: over 59 crore Jan Dhan accounts opened since August 2014, over 59 crore Mudra loan accounts with credit of over ₹43 lakh crore, and the RBI's Financial Inclusion Index rising from 43.4 in 2017 to 70 in 2026.
Public Sector Banks (PSBs) in India: From Nationalisation to the 4R Reforms
Public sector banks (PSBs) are banks in which the Government of India owns more than half of the shares. India has 12 of them today, including the State Bank of India (SBI), Punjab National Bank, Bank of Baroda and Canara Bank. They are regulated by the Reserve Bank of India (RBI) like any other bank, but their owner is the government. Together they still hold a very large share of India's bank deposits and loans.
The record profit and the 1.93% gross NPA ratio are the outcome of the 4R clean-up described above. The finance ministry used these numbers to show that PSBs, which were making heavy losses in 2017-18, are now among the strongest parts of the banking system.
Non-Performing Assets (NPAs): Definition, Classification, and Measurement
A non-performing asset (NPA) is a loan that has stopped "performing", meaning the borrower has stopped paying interest or instalments for a long time. Under RBI rules, a loan becomes an NPA when interest or principal stays unpaid for more than 90 days. Banks earn nothing from such loans and must set aside money (provisions) to cover the likely loss. The gross NPA ratio shows bad loans as a share of all loans; the net NPA ratio shows what is left after provisions.
The fall in PSB gross NPAs from about 14.58% to 1.93% in eight years is the headline of the finance ministry's data. It shows how far the bad-loan problem of the 2010s has been cleaned up.
Financial Inclusion Index (FI-Index) of the RBI
The Financial Inclusion Index, or FI-Index, is a single number created by the Reserve Bank of India to show how well ordinary people in India are connected to formal financial services. It covers banking, investments, insurance, postal services and pensions. The index runs from 0 to 100. A score of 0 means everyone is completely left out of formal finance, and 100 means full inclusion.
The finance ministry cited the rise of the FI-Index from 43.4 in 2017 to 70 in 2026 as proof that PSB-led schemes like Jan Dhan and Mudra have brought more people into formal banking. The rise in the Usage score shows that people are not just opening accounts but are beginning to use them.
- PSB net profit FY26: ₹1.98 lakh crore (record; up about 11% from ₹1.78 lakh crore in FY25)
- PSB gross NPA: 1.93% and net NPA: 0.39% (31 March 2026); peak gross NPA about 14.58% (March 2018)
- PSB total business: about ₹283 lakh crore (March 2026)
- PSB CRAR: about 16.6% (minimum required 11.5%)
- Number of PSBs: 12
- Jan Dhan accounts: over 59 crore since August 2014
- Mudra: over 59 crore loan accounts, credit over ₹43 lakh crore (as per the finance ministry)
- RBI FI-Index: 43.4 (2017) to 70.0 (March 2026)
- Bank locker compensation under RBI rules: up to 100 times the annual locker rent
- Cyber financial fraud helpline: 1930