Public sector banks (PSBs) are expected to cross the Rs 2 lakh crore combined profit mark in the current financial year, buoyed by strong balance sheets, steady credit expansion and improved asset quality, Financial Services Secretary M Nagaraju said.Speaking to PTI in an interview, Nagaraju said the Indian banking system remains resilient, supported by regulatory oversight and prudent risk management frameworks.“As I said, banks are at the bellwether for the strength of the economy. Therefore, they are resilient. We have very prudent management systems in place under the regulator RBI. So we are not much worried about the external factors negatively impacting our banking sector,” he told PTI.
Profit trajectory and growth momentum
On profitability outlook, Nagaraju said PSBs are likely to cross the Rs 2 lakh crore profit milestone in FY26.“this year (ongoing financial year) we will cross Rs 2 lakh crore. We already touched almost Rs 1 lakh crore in the first half…I think we will cross Rs 2 lakh crore,” he said.PSB profits have shown strong growth over the last few years. Combined profit crossed Rs 1 lakh crore to Rs 1.05 lakh crore in FY23, rose to Rs 1.41 lakh crore in FY24 and further increased to Rs 1.78 lakh crore in FY25, driven by better asset quality, credit growth, strong capital adequacy and improved return ratios.Nagaraju said PSB credit growth currently stands at around 12 per cent, while deposit growth at about 10 per cent also remains strong.
Asset quality and capital strength improve
Asset quality indicators have improved significantly across PSBs. Gross NPA stood at a record low of 2.30 per cent and net NPA at around 3 per cent at the end of September 2025.Provisioning coverage ratio improved to 94.63 per cent, while capital adequacy ratio stood at 15.96 per cent at the end of the first half of the current financial year.PSBs declared dividends of Rs 34,990 crore in FY25, of which the government share was Rs 22,699 crore. This compares with total dividend payout of Rs 27,830 crore in FY24, including Rs 18,013 crore for the government.
Government divestment and capital raising
During the current financial year, the government mobilised resources through stake dilution in select PSBs.The government realised Rs 2,627.52 crore through offer for sale (OFS) in Bank of Maharashtra and Rs 1,419.36 crore through OFS in Indian Overseas Bank.Separately, the Finance Ministry is evaluating a proposal to increase foreign direct investment (FDI) limit in PSBs to 49 per cent from the current 20 per cent to strengthen capital base.“We are still considering, and inter-ministerial consultation is on for raising FDI cap to 49 per cent,” Nagaraju has said.At present, FDI in PSBs is capped at 20 per cent. In comparison, private sector banks can receive up to 74 per cent foreign investment, with up to 49 per cent allowed under the automatic route and investments beyond that requiring government approval.
