PSU banks profit to cross ₹2 trn milestone in FY26: DFS Secy Nagaraju

Buoyed by the good health of public sector banks (PSBs), Financial Services Secretary M Nagaraju has exuded confidence that the combined profit of these banks should cross Rs 2 trillion in the current financial year.

Stressing that the Indian banking sector is in good shape, he said credit growth of PSBs is at 12 per cent this year, which is tremendously "good", while deposit growth at 10 per cent is also reasonably very good.

"As I said, banks are at the bellwether for the strength of the economy. Therefore, they are resilient. We have very prudent management systems in place under the regulator RBI. So we are not much worried about the external factors negatively impacting our banking sector," he told PTI in an interview.

Asked about the profitability of PSBs, "this year (ongoing financial year) we will cross Rs 2 trillion. We already touched almost Rs 1 trillion in the first half...I think we will cross Rs 2 trillion."  The combined profit of PSBs would double in three years. PSBs profit crossed Rs 1 trillion to Rs 1.05 trillion in FY23, touched another high of Rs 1.41 trillion in 2023-24 and subsequently reached Rs 1.78 trillion in FY25 on account of significant improvement in asset quality, credit growth, healthy capital adequacy ratio and rising return on assets.

As far as asset quality of PSBs are concerned, Gross NPA is at record low of 2.30 per cen and net NPA at 3 per cent at the end of September 2025. Provisioning coverage ratio (PCR) improved to 94.63 per cent at the end of September 2025, while the capital adequacy ratio of PSBs stood at 15.96 per cent at the end of the first half of the current fiscal.

PSBs declared dividend of Rs 34,990 crore (Gol share Rs 22,699 crore) in FY 2024-25 against total dividend of Rs 27,830 crore to shareholders (GoI share Rs 18,013 crore) in FY 2023-24.

During the current financial year, the Government of India has successfully mobilised resources through divestment of its shareholding in select PSBs.

Amounts of Rs 2,627.52 crore and Rs 1,419.36 crore were realised through the Offer for Sale (OFS) of Government of India's shares in Bank of Maharashtra and Indian Overseas Bank, respectively.

The Finance Ministry is considering raising the foreign direct investment (FDI) limit in public sector banks (PSBs) to 49 per cent from the current 20 per cent to strengthen their capital base.

"We are still considering, and inter-ministerial consultation is on for raising FDI cap to 49 per cent," Nagaraju has said.

At present, FDI in PSBs is capped at 20 per cent, while private sector banks can receive up to 74 per cent foreign investment. In private banks, FDI up to 49 per cent is permitted through the automatic route, while investment beyond 49 per cent and up to 74 per cent requires government approval.