New Delhi: Public sector banks (PSBs) continued their strong performance in the first half of FY 2025-26, posting an aggregate net profit of ₹93,675 crore, reflecting steady year-on-year growth. The collective business of PSBs rose to ₹261 lakh crore as of September 2025, with advances growing 12.3% and deposits up 9.6% year-on-year, underscoring sustained credit momentum and healthy deposit mobilization.
The data was reviewed during a meeting chaired by Department of Financial Services (DFS) secretary M Nagaraju in New Delhi on Wednesday, where the performance of PSBs in the first half of the fiscal was assessed across key financial and operational parameters.
The gross non-performing assets (GNPA) ratio of PSBs declined further to 2.30%, while the net NPA ratio dropped to a record 0.45%, highlighting continued improvement in asset quality. Return on Assets (RoA) stood at 1.08%, and the cost of funds improved to 4.97%, indicating enhanced efficiency and profitability across the sector.
Nagaraju commended banks for their consistent performance and urged them to sustain momentum in low-cost deposit mobilization and credit growth, particularly in the MSME and agriculture sectors. He emphasised strengthening risk management, underwriting standards, and operational resilience to maintain profitability in an evolving financial environment.
Digital Push & AI Integration
PSBs showcased new initiatives in digital banking and mobile app enhancements, including multilingual interfaces, improved user experience, and faster transaction processing. A live demonstration of these features was presented during the review.
The DFS secretary underscored the need for inclusive and secure digital banking, calling on banks to bolster cyber resilience and grievance redressal mechanisms. He encouraged the responsible adoption of AI and data analytics to enhance customer service and operational efficiency.
The UIDAI also made a presentation on integrating Aadhaar-based digital identity and de-duplication processes to streamline services. The meeting further discussed the emerging theme of human-AI convergence in banking.
Progress under key government schemes such as PM Surya Ghar Muft Bijli Yojana, PM Vidya Lakshmi Yojana, PM Vishwakarma Yojana and JanSamarth digital lending was reviewed. Banks were advised to reduce turnaround time for applications and expand assisted journeys through business correspondents and coordination between state level bankers' committees (SLBCs) .
Performance under financial inclusion programmes — including PMJDY, PMJJBY, PMSBY, APY, PMMY, and PM SVANidhi — was also examined.
Recoveries & Resolution Momentum
On the recovery front, PSBs continued to improve performance, with the National Asset Reconstruction Company Ltd (NARCL) acquiring ₹1.62 lakh crore of debt and achieving significant recoveries during the first half. Banks were advised to leverage digital platforms like BAANKNET for faster and transparent resolutions, and to reinforce early warning systems for potential stress accounts.
The PSBs highlighted their progress under identified "champion sectors" such as renewable energy, green infrastructure, food processing, tourism and data centres. The 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.