Public sector bank GNPAs hit historic low of 1.9% in FY26, net profit at record ₹1.98 lakh crore
Synopsis
India's public sector banks have crossed a milestone that seemed distant a decade ago: GNPAs below 2 per cent and a collective net profit of ₹1.98 lakh crore in FY26. Paired with the government's ECLGS 5.0 rollout to cushion businesses from the West Asia crisis, the data tabled in Parliament signals a banking system that is, for now, both profitable and resilient.
Key Takeaways
Public sector bank GNPAs fell to a historic low of 1.9 per cent in FY 2025–26 , the first time they have dropped below the 2 per cent mark.
Collective net profit of public sector banks reached an all-time high of ₹1.98 lakh crore in FY26.
Aggregate business crossed the ₹283 lakh crore mark.
MSME and retail credit grew 19.6 per cent and 19.8 per cent respectively; agriculture credit rose 16.2 per cent .
The government launched ECLGS 5.0 in May 2026 with a total credit flow cap of ₹2,55,000 crore , including ₹5,000 crore for the airline sector.
Airline borrowers can access up to ₹1,500 crore per borrower, with amounts above ₹1,000 crore requiring proportionate promoter equity.
Public sector banks in India have recorded their strongest financial performance in decades, with Gross Non-Performing Assets (GNPAs) falling to a historic low of 1.9 per cent in FY 2025–26 and net profit reaching an all-time high of ₹1.98 lakh crore, according to data tabled in Parliament on 29 July 2025. The figures were presented by Minister of State for Finance Pankaj Chaudhary in a written reply to a question in the Rajya Sabha, underscoring what the government described as a fundamental turnaround in the health of state-owned lenders.
Key Financial Milestones
The aggregate business of public sector banks has crossed the ₹283 lakh crore mark, reflecting broad-based expansion across lending and deposit books. The 1.9 per cent GNPA ratio marks a multi-decadal low, a sharp reversal from the peak stress levels seen in the mid-2010s when bad loans at state-owned banks threatened systemic stability. Net profit at ₹1.98 lakh crore is the highest ever recorded by the public sector banking system collectively.
Credit Growth Across Key Sectors
Credit growth has accelerated meaningfully in FY 2025–26, with MSME and retail loans registering robust growth of 19.6 per cent and 19.8 per cent, respectively, according to the data. Credit to the agriculture sector surged by 16.2 per cent. These numbers suggest that the expansion is not concentrated in a single segment but is broad-based — a healthier signal than credit booms driven by one sector alone.
ECLGS 5.0: A Buffer Against West Asia Disruption
Minister Pankaj Chaudhary also informed Parliament that the government launched the Emergency Credit Line Guarantee Scheme (ECLGS 5.0) in May 2026 to address short-term liquidity pressures on businesses arising from the West Asia crisis. The scheme provides guarantee coverage through the National Credit Guarantee Trustee Company Limited (NCGTC) to Member Lending Institutions (MLIs) for additional credit extended to eligible borrowers.
Under ECLGS 5.0, MSMEs receive 100 per cent guarantee coverage, while non-MSMEs and the scheduled passenger airline sector receive 90 per cent coverage. The total credit flow under the scheme is capped at ₹2,55,000 crore, of which ₹5,000 crore is specifically earmarked for the airline sector.
Special Provisions for the Airline Sector
Airline-sector borrowers are eligible for assistance of up to 100 per cent of their total peak credit outstanding during the fourth quarter of FY 2025–26. The maximum loan available per airline borrower under ECLGS 5.0 is ₹1,500 crore. Notably, any amount beyond ₹1,000 crore and up to ₹1,500 crore requires a proportionate equity contribution from the promoters — a condition designed to ensure skin-in-the-game accountability.
What This Signals
The turnaround in public sector bank health follows years of government-led recapitalisation, tighter provisioning norms, and the resolution push under the Insolvency and Bankruptcy Code (IBC). This is the first time GNPAs have fallen below the 2 per cent threshold for state-owned lenders as a group. With credit growth running well above nominal GDP growth, the next test will be whether asset quality holds as the loan book expands rapidly.
Point of View
But the timing of this disclosure matters: credit is growing at nearly 20 per cent in MSME and retail segments — segments that historically carry higher default risk during economic stress. The ECLGS 5.0 launch, triggered by the West Asia crisis, is a reminder that external shocks can rapidly alter asset quality trajectories. The question mainstream coverage is not asking is whether today's record profits are partly a function of a benign credit cycle rather than structural reform alone. If the cycle turns, the stress-test for this 'historic low' begins.
NationPress
28 Jul 2026
Frequently Asked Questions
What is the current GNPA ratio of public sector banks in India?
The Gross Non-Performing Asset (GNPA) ratio of public sector banks fell to a historic low of 1.9 per cent in FY 2025–26, the first time it has dropped below 2 per cent. This data was tabled in the Rajya Sabha by Minister of State for Finance Pankaj Chaudhary on 29 July 2025.
What is the record net profit reported by public sector banks in FY26?
Public sector banks collectively posted a net profit of ₹1.98 lakh crore in FY 2025–26, the highest ever recorded by the state-owned banking system. Their aggregate business also crossed the ₹283 lakh crore mark during the same period.
What is ECLGS 5.0 and why was it launched?
ECLGS 5.0 is the fifth iteration of the Emergency Credit Line Guarantee Scheme, launched by the government in May 2026 to help businesses manage short-term liquidity stress caused by the West Asia crisis. It provides 100 per cent guarantee coverage for MSMEs and 90 per cent for non-MSMEs and the scheduled passenger airline sector, with a total credit flow cap of ₹2,55,000 crore.
How does ECLGS 5.0 benefit the airline sector?
Under ECLGS 5.0, scheduled passenger airlines can access loans of up to ₹1,500 crore per borrower, equivalent to 100 per cent of their peak credit outstanding in Q4 FY 2025–26. Borrowings above ₹1,000 crore require a proportionate equity contribution from promoters, and ₹5,000 crore has been specifically earmarked for the sector within the overall scheme.
How fast is credit growing at public sector banks?
Credit growth at public sector banks accelerated sharply in FY 2025–26, with MSME loans growing 19.6 per cent and retail loans rising 19.8 per cent. Agriculture credit also expanded by 16.2 per cent, indicating broad-based lending momentum across key economic segments.
