Public sector banks (PSBs) have reported a total business of Rs 283.3 lakh crore for the financial year 2025-26, marking a year-on-year (YoY) growth of 12.8 percent. This significant increase underscores the robust performance of state-owned lenders amidst a favorable economic environment.
Key Drivers of Growth
The growth in total business was primarily driven by a substantial rise in both deposits and advances. Deposits grew by 11.5 percent YoY, while advances surged by 14.2 percent during the same period. This dual expansion highlights the banks' ability to mobilize savings and extend credit to productive sectors of the economy.
Credit Growth Across Sectors
Credit disbursement witnessed broad-based growth across various segments. Retail loans, including housing and personal loans, expanded by 16 percent, while agriculture credit grew by 12 percent. The MSME sector also saw a healthy uptick of 13.5 percent, reflecting improved access to formal credit for small businesses.
Deposit Mobilization
On the deposit front, term deposits grew by 10.8 percent, and current account savings account (CASA) deposits increased by 12.2 percent. The CASA ratio improved marginally, indicating better low-cost deposit mobilization. This has helped banks manage their cost of funds effectively.
Asset Quality and Profitability
The asset quality of PSBs continued to improve, with the gross non-performing asset (GNPA) ratio declining to 4.2 percent as of March 2026, down from 4.8 percent a year ago. Net NPAs also reduced to 1.1 percent. Consequently, net profit for the banking sector rose by 18 percent YoY, driven by higher net interest income and lower provisioning.
Capital Adequacy
The capital adequacy ratio (CAR) of PSBs stood at 15.6 percent, well above the regulatory requirement of 11.5 percent. This strong capital position provides a buffer for future growth and enables banks to meet Basel III norms comfortably.
Outlook and Future Prospects
The positive momentum in PSB business is expected to continue in FY26-27, supported by sustained economic growth, government capital infusion, and digital transformation initiatives. Banks are focusing on enhancing customer experience through technology and expanding their reach in underbanked regions.
Overall, the 12.8 percent YoY growth in total business reflects the resilience and adaptability of public sector banks in a dynamic economic landscape. With improved asset quality and robust capital buffers, PSBs are well-positioned to support India's growth trajectory.
