Public Sector Banks Record ₹93,675 Crore Profit in H1 FY 2025–26: DFS Review

According to DFS data, PSBs collectively reported a net profit of ₹93,675 crore, marking steady year-on-year growth.

The Department of Financial Services (DFS), under the Ministry of Finance, conducted a comprehensive review of Public Sector Banks (PSBs) to assess their performance for the first half (H1) of FY 2025–26. The meeting, chaired by Shri M. Nagaraju, Secretary, DFS, was held in New Delhi and attended by Managing Directors and Chief Executive Officers of all PSBs.

The session focused on multiple strategic areas, including financial performance, asset quality, recovery and resolution processes, digital transformation, human–AI convergence, and the progress made under flagship government schemes that align with the vision of Viksit Bharat @2047.

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Robust Financial Performance: Profits and Balance Sheet Strength

Public Sector Banks demonstrated strong financial performance during the first half of FY 2025–26. According to DFS data, PSBs collectively reported a net profit of ₹93,675 crore, marking steady year-on-year growth.

The aggregate business of PSBs stood at ₹261 lakh crore as of September 2025, driven by healthy growth in both advances (12.3% y-o-y) and deposits (9.6% y-o-y). The review noted that the Gross NPA ratio of PSBs had fallen to 2.30%, while the Net NPA was further contained at 0.45%, indicating sustained improvement in asset quality and credit discipline.

Additionally, PSBs recorded a Return on Assets (RoA) of 1.08% and an improved cost of funds at 4.97%, reflecting enhanced efficiency, productivity, and profitability across the public banking network.

The DFS Secretary commended the consistent performance of PSBs and urged them to sustain their momentum by focusing on low-cost deposit mobilization, MSME and agricultural lending, and prudent risk management.

“Public Sector Banks have shown resilience, efficiency, and innovation in meeting the country’s financial needs. Sustaining this trajectory requires vigilance, customer-centric reforms, and continued digital transformation,” Shri Nagaraju said.

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Digital Transformation and Responsible AI Integration

The review highlighted the rapid progress of PSBs in digital banking and financial inclusion technologies. Banks presented live demonstrations of their mobile app upgrades, showcasing improved user interfaces, multilingual accessibility, and faster transaction capabilities.

The UIDAI made a special presentation on the use of Aadhaar-based identity integration and de-duplication to strengthen customer onboarding and fraud prevention systems.

The DFS Secretary emphasized that digital banking must remain inclusive, secure, and resilient, especially as banks expand into rural and semi-urban markets. He directed PSBs to enhance cybersecurity frameworks, operational continuity plans, and grievance redressal mechanisms.

A significant portion of the meeting explored the theme of “Human–AI Convergence in Banking.” Shri Nagaraju encouraged PSBs to leverage Artificial Intelligence (AI) and advanced data analytics for personalized service delivery, predictive risk assessment, and smart credit monitoring, while ensuring ethical and transparent AI use.

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Review of Flagship Schemes and Financial Inclusion Initiatives

The meeting reviewed the implementation of several key government flagship programmes, including:

• PM Surya Ghar Muft Bijli Yojana

• PM Vidya Lakshmi Yojana

• PM Vishwakarma Yojana

• JanSamarth Digital Lending Platform

Banks were advised to reduce turnaround times, expand assisted digital journeys through Business Correspondents (BCs), and strengthen coordination through SLBCs (State Level Bankers’ Committees).

Progress under financial inclusion schemes—including PMJDY (Jan Dhan Yojana), PMJJBY (Jeevan Jyoti Bima Yojana), PMSBY (Suraksha Bima Yojana), APY (Atal Pension Yojana), PMMY (MUDRA Yojana), and PM SVANidhi—was reviewed in detail.

The Secretary reiterated the importance of the “Aapki Poonji, Aapka Adhikar” campaign and directed banks to intensify outreach in aspirational districts and raise public awareness about the Integrated Unclaimed Asset Portal for citizen access to dormant financial assets.

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Asset Quality, Recoveries, and Resolution Mechanisms

PSBs continued to post improvement in recovery and resolution performance, with the National Asset Reconstruction Company Limited (NARCL) acquiring debt aggregating ₹1.62 lakh crore and achieving significant recoveries during H1 FY 2025–26.

Banks were advised to leverage digital recovery platforms such as BAANKNET to ensure faster, transparent, and data-driven resolutions. Shri Nagaraju stressed the need for early warning systems, improved stress detection frameworks, and credit portfolio diversification to maintain asset quality.

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Champion Sectors and Sustainable Financing

In line with the Government’s Viksit Bharat @2047 vision, PSBs presented updates on their involvement in champion sectors, including:

• Renewable energy and green infrastructure

• Food processing and agricultural value chains

• Tourism, logistics, and data center ecosystems

Banks were encouraged to scale up green financing, adopt environmental risk assessments, and integrate sustainability-linked performance metrics into lending practices.

The Secretary also urged banks to expedite preparedness for the Expected Credit Loss (ECL) framework, emphasizing the importance of robust data models and forward-looking provisioning systems.

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Launches: Startup Loan Module and PSB Manthan 2025 Report

The meeting also witnessed two major releases that mark significant progress in India’s banking modernization journey:

1. Launch of the Startup Loans Module on the JanSamarth Portal, providing a unified digital platform for startups to apply for credit across PSBs with simplified eligibility and faster processing.

2. Release of the PSB Manthan 2025 Report, which outlines the collective vision and roadmap of PSBs toward achieving Viksit Bharat @2047, focusing on innovation, inclusivity, and sustainability in banking.

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Way Forward: Innovation with Prudence

In his closing remarks, Shri M. Nagaraju urged PSBs to maintain financial discipline, deep customer engagement, and technology-led governance.

“The next phase of India’s banking growth will be defined by prudence, innovation, and inclusion. Public Sector Banks must lead this transformation through responsible lending, digital empowerment, and a deep sense of social commitment,” he said.

The review reaffirmed that India’s PSBs remain the backbone of the financial ecosystem, driving national priorities in infrastructure, sustainability, and inclusive economic growth while ensuring that banking remains accessible to every citizen.