State-owned banks continue to post record profits. The aggregate net profit of these banks hit an all-time high of Rs 1.98 lakh crore in FY26, led by improved asset quality, strong credit growth and higher income.

This is the fourth straight year of aggregate profitability for public sector banks (PSBs), the finance ministry said on Tuesday.

Aggregate operating profit reached Rs 3.21 lakh crore, while aggregate net profit increased by 11.1% year-on-year to a historic high of Rs 1.98 lakh crore.

The aggregate business of PSBs increased to Rs 283.3 lakh crore as on 31 March 2026, registering growth of 12.8% over the previous year.

Aggregate deposits rose 10.6% YoY to Rs 156.3 lakh crore, reflecting continued depositor confidence and strong resource mobilisation by PSBs.

Gross advances grew 15.7% YoY at Rs 127 lakh crore, indicating sustained credit demand across sectors of the economy.

"Public sector banks (PSBs) continued to register strong financial performance during 2025-26, reflecting sustained business growth, improved asset quality, record profitability and strong capital position.

"The improved performance demonstrates the resilience, stability and enhanced institutional capacity of PSBs in supporting the credit needs of a fast-growing Indian economy," the ministry said in a statement.

Asset quality of PSBs improved significantly during 2025-26, with gross NPA ratio (non-perfuming assets) declining to 1.93% and net NPA ratio to 0.39% as on 31 March 2026, reflecting historically low levels of stressed assets.

Further, each PSB maintained provisioning coverage ratio of above 90%, indicating prudent provisioning practices, improved underwriting standards, effective risk management mechanisms and strengthened balance sheet resilience.

Fresh slippages continued to decline during FY26, with slippage ratio dropping to 0.7%. Total recoveries, including recoveries from written-off accounts, stood at Rs 86,971 crore, reflecting improved recovery mechanisms and better credit discipline across PSBs.

The continued improvement in the performance of PSBs reflects the resilience of the Indian economy and the government's sustained reforms aimed at strengthening the banking sector through improved governance, technology adoption, enhanced credit discipline and wider access to formal credit. These measures have contributed to lower stressed assets, improved operational efficiency and stronger financial position of PSBs, the ministry said.

"Today, PSBs are well-capitalised, profitable and institutionally stronger, enabling them to effectively support India's growth aspirations and contribute meaningfully towards the vision of Viksit Bharat by 2047," the ministry added.