According to Financial Services Secretary M Nagaraju, the profit of public sector banks can be Rs 2 lakh crore in the financial year 2026. Image Credit source: ChatGPT
Encouraged by the good health of public sector banks (PSBs), Financial Services Secretary M Nagaraju has expressed confidence that the combined profit of these banks will exceed Rs 2 lakh crore in the current financial year. Emphasizing the good condition of the Indian banking sector, he said that the loan growth of PSBs this year is 12 percent, which is very “good”, while the deposit growth of 10 percent is also quite good. He said that as I said, banks are indicators of the strength of the economy. Therefore, they are flexible. We have very prudent management systems in place under the regulator RBI. Therefore, we are not too worried about external factors having a negative impact on our banking sector.
Record profit of government banks
When asked about the profitability of PSB, he said that this year (current financial year) we will cross the figure of Rs 2 lakh crore. We have almost touched the figure of Rs 1 lakh crore in the first half itself… I think we will cross the figure of Rs 2 lakh crore. Combined profit of PSBs will double in three years. Profit of public sector banks increased from Rs 1 lakh crore to Rs 1.05 lakh crore in FY2023, reached another high of Rs 1.41 lakh crore in FY2023-24 and reached Rs 1.78 lakh crore in FY2025 due to significant improvement in asset quality, loan growth, healthy capital adequacy ratio and rising return on assets.
Improvement on NPA
Talking about the asset quality of public sector banks (PSBs), at the end of September 2025, gross NPA stood at a record low of 2.30 percent and net NPA at 3 percent. The provisioning coverage ratio (PCR) increased to 94.63 percent at the end of September 2025, while the capital adequacy ratio of PSBs stood at 15.96 percent at the end of the first half of the current financial year. The PSB declared a dividend of Rs 34,990 crore (Govt of India’s share Rs 22,699 crore) in FY 2024-25, while the total dividend paid to shareholders in FY 2023-24 was Rs 27,830 crore (Govt of India’s share Rs 18,013 crore).
earnings from selling shares
During the current financial year, the Government of India has successfully mobilized resources by selling its shareholding in select PSBs. The Government of India raised Rs 2,627.52 crore and Rs 1,419.36 crore through offer for sale (OFS) of shares in Bank of Maharashtra and Indian Overseas Bank respectively. The Finance Ministry is considering increasing the foreign direct investment (FDI) limit to 49 percent from the current 20 percent to strengthen the capital of public sector banks (PSBs).
Consideration of increasing foreign investment
Nagaraju said that we are still considering it and consultations are going on at the inter-ministerial level regarding whether the FDI limit should be increased to 49 percent. At present, the limit of foreign direct investment in public sector banks is 20 percent, while private sector banks can receive up to 74 percent foreign investment. In private banks, foreign direct investment up to 49 percent is automatically approved, while investments above 49 percent and up to 74 percent require government approval.