PSBs posted ₹44,218 Cr profit in Q1 FY26, but NII flatness flags margin stress

India's public sector banks collectively posted ₹44,218 crore in profit during Q1 FY26, marking an 11% year-on-year increase. SBI alone captured 43% of sector earnings at ₹19,160 crore, underscoring its market dominance. However, three mid-tier lenders—Indian Overseas Bank, Punjab & Sind Bank, and Central Bank of India—posted the sharpest YoY growth rates, signalling recovery efforts in smaller players.

Punjab National Bank was the outlier, with profits plunging 48% to ₹1,675 crore, raising questions about asset quality and cost structure at the lender. The divergence across the 12-bank cohort suggests uneven operational recovery post-pandemic.

On August 20, 2025, Financial Services Secretary M. Nagaraju chaired a rare all-PSB review meeting, where a critical tension surfaced: despite headline profit gains, net interest income remained flat. Nagaraju pressed bank chiefs to tighten cost management and strengthen risk controls to sustain earnings growth.