Bond windfall cushions NII strain for PSBs as margins shrink on rate cuts

Public sector banks saw Q1 FY26 profit rise 10.6% YoY on treasury gains and lower provisions, while NII was flat as lenders passed on policy rate cuts to customers

Public-sector banks (PSBs) posted  10.6 per cent year-on-year (Y-o-Y) growth in net profit in the April–June quarter (Q1) of 2025-26 (FY26) on the back of a hefty rise in other income, covering elements like treasury gains, fees, commissions, and recoveries. The decrease in provisions for bad loans also supported the bottom line amid an erosion in net interest income (NII) and margins. 

Net profit stood at ₹44,218 crore in Q1FY26, up from ₹39,974 crore a year ago. Sequentially, however, net profit shrank by 8.6 per cent from ₹48,370 crore in the fourth quarter (Q4) of 2024-25 (FY25), according to data