Public sector banks have reported a combined net profit of Rs 93,675 crore in the first half of FY26 while improving their asset quality.

The state-run banks saw their gross non-performing assets decline to a multiyear low of 2.3%. Net NPA also dipped to 0.45%.

Aggregate business grew to Rs 261 lakh crore as of 30 September 2025, with advances growing by 12.3% year-on-year and deposits by 9.6%.

The return on assets of public sector banks was 1.08%, while the cost of funds improved to 4.97%, reflecting better efficiency and profitability during the first half of the current financial year.

At a meeting between finance ministry officials and top executives of public sector banks, it was noted that lenders continued to register improvement in recoveries. The National Asset Reconstruction Company Limited (NARCL) has acquired debt aggregating Rs 1.62 lakh crore and achieved significant recoveries during the first half of the year.

Banks were advised to leverage digital platforms such as BAANKNET for faster and transparent resolutions and to maintain focus on strengthening early warning systems.

The meeting reviewed key areas including financial performance, asset quality, recovery and resolution, digital transformation and progress under government flagship schemes. 

Chairing the meeting, M Nagaraju, secretary of the department of financial services, stressed on the need to sustain momentum in low-cost deposit mobilisation and credit growth, particularly in the micro, small, and medium enterprises (MSME) and agriculture sectors. 

Nagaraju urged PSBs to sustain financial discipline, deepen customer-centricity, and lead India’s banking transformation with prudence, innovation and inclusion as guiding principles. 

Banks were advised to further strengthen risk management, underwriting practices, and operational resilience to sustain profitability in an evolving financial environment.

UIDAI (Unique Identification Authority of India) made a presentation on the usage of Aadhaar for digital identity integration and de-duplication. Discussions were also held on human-artificial intelligence (AI) convergence in banking.

Nagaraju emphasised that digital banking must remain inclusive and secure, urging banks to enhance cyber resilience, ensure operational continuity and improve the quality and timeliness of grievance redressal. Adoption of responsible AI and data analytics was encouraged to improve customer service delivery.

The progress under key government schemes was reviewed in detail. Banks were advised to strengthen implementation of the PM Surya Ghar Muft Bijli Yojana, PM Vidya Lakshmi Yojana, PM Vishwakarma Yojana, and JanSamarth digital lending initiatives, with emphasis on reducing application turnaround time and expanding assisted journeys through business correspondents and State Level Bankers' Committee (SLBC) coordination.

The secretary also reviewed performance under financial inclusion programmes such as PMJDY, PMJJBY, PMSBY, APY, PMMY and PM SVANidhi, and emphasised the importance of the ongoing “Aapki Poonji, Aapka Adhikar” campaign. 

Directions were given to ensure seamless implementation, enhance public awareness of the integrated unclaimed asset portal and intensify outreach in underserved and aspirational districts.

In alignment with the government’s vision of Viksit Bharat by 2047, PSBs detailed progress under identified champion sectors such as renewable energy, green infrastructure, food processing, tourism and data centres. 

Banks were encouraged to scale up credit in these sectors, adopt sustainable financing practices and enhance preparedness for the transition to the expected credit loss (ECL) framework through robust models and data-driven provisioning.