Public sector banks (PSBs) are lining up record profits, their bad loans are declining and they are well capitalised to chase fast growth.

In the nine months through December 2024, the 12 state-owned banks have reported a highest-ever aggregate net profit of Rs 1.29 lakh crore over the year-ago period, marking an annual increase of 31.3%. The aggregate operating profit of Rs 2,20,243 crore in the nine months of the financial year is also the highest.

In a statement, the finance ministry said the performance of PSBs has shown significant improvement on key financial parameters, like record net profit growth, improved asset quality, and build-up of adequate capital buffers, during the period under review.

The improved asset quality is also visible from significantly low net NPA ratio at 0.59% (aggregate net NPA outstanding of Rs 61,252 crore), the finance ministry said in a statement.

The aggregate business of these 12 banks touched Rs 242.27 lakh crore during this nine-month period, up 11% year-on-year. Aggregate deposit growth improved at 9.8%. The loan book of the PSBs grew 12.4%, led by retail credit growth of 16.6%, agriculture by 12.9% and MSME by 12.5%.

Aggregate capital to risk weighted assets ratio stood at 14.83%, significantly above the minimum requirement of 11.5%.

“PSBs are adequately capitalised and well poised to meet credit demands of all sectors of the economy, with special thrust on agriculture, MSME and infrastructure sector,” the ministry said.

The finance ministry further said the policy and process reforms have resulted in enhanced systems and processes for credit discipline, recognition and resolution of stressed assets, responsible lending, improved governance, financial inclusion initiatives and technology adoption.

These measures, it said, have led to a sustained financial health and robustness of banking sector as a whole that is reflected in the current performance of the PSBs.

The 12 PSBs are State Bank of India, Punjab National Bank, Bank of Baroda, Canara Bank, Union Bank of India, Bank of India, Bank of Maharashtra, Central Bank of India, Indian Bank, Indian Overseas Bank, Punjab & Sind Bank and UCO Bank.