India’s listed banking sector achieved a historic milestone in the December quarter, with combined net profit crossing Rs 1 lakh crore for the first time. The aggregate net profit of 20 private sector banks and 12 public sector banks, excluding small finance banks, stood at Rs 1.01 lakh crore, up 10.6 percent from Rs 90848 crore a year ago.
The strong performance was supported by double-digit growth in other income and stable margins amid benign asset quality. However, elevated operating expenses partly offset gains. Public sector banks (PSBs) reported Rs 52,604 crore in combined profit, accounting for 52 percent of the total, while private sector banks posted Rs 47,895 crore.
Nearly half of the total earnings came from State Bank of India, HDFC Bank and ICICI Bank. Within private banks, HDFC Bank and ICICI Bank contributed 63 percent of total private sector profit. State Bank of India alone accounted for 40 percent of total PSU bank profit.
PSBs recorded 18.3 percent year-on-year growth in net profit, compared with 3.3 percent growth for private banks. Net interest margins remained largely flat quarter-on-quarter as liability repricing offset loan repricing. PSBs outperformed private banks due to lower Credit-to-Deposit ratios, which supported balance sheet expansion. Capital levels remained strong, aided by bond issuances to fund credit growth.
According to a Kotak Institutional Equities report, loan growth recovered steadily, led by PSBs, though treasury income remained weak. Asset quality remained favourable, with firm recoveries in unsecured loans. Most banks reported a 10 to 30 basis point quarter-on-quarter improvement in gross NPA ratios, while overall GNPA and net NPA improved by 20 basis points.
In 3QFY26, loan growth improved by 170 basis points to 12.5 percent quarter-on-quarter. RBI data showed system credit growth at 14.6 percent year-on-year in February 2026. PSBs grew at 14 percent, while private banks grew 11 percent. Retail loan growth reached 14 percent in December 2025, with gold loans surging 128 percent year-on-year.
Sanjay Agarwal of CareEdge Ratings said profitability was driven by credit growth and non-interest income, with margins supported by secured portfolio shifts. Treasury gains may moderate, but asset quality is expected to remain stable.
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