Earned profit of ₹1.78 lakh crore

(By Prof. Nandkumar Kakirde)

The financial performance of public sector banks for the year ending 31 March 2025 has been historic. All these banks have earned a profit of ₹1.78 lakh crore, which will provide significant financial support to the central government in the form of dividends. Let’s look at the reasons behind this historic achievement.

In the year ending 31 March 2024, public sector banks had earned a profit of ₹1.41 lakh crore. This has grown by a remarkable 26% to reach ₹1.78 lakh crore by the end of March 2025. The central government had adopted a different strategy to strengthen public sector banks and bring loss-making banks into profit. Conscious efforts were made to take the operations of public sector banks to the grassroots and to provide the best possible services.

For this, they robustly implemented the “4Rs” policy. This included: transparent study and timely resolution of non-performing loans (Recognition); significant increase in loan disbursement (Resolution); recapitalization of banks (Recapitalization); and reforms in the financial ecosystem and public banks (Reforms). As a result, the overall performance of all nationalized banks has improved compared to previous years.

From 2017 to 2021, the central government increased capital investment in these banks by as much as ₹3.11 lakh crore. These banks have made good progress in digital banking as well. There has been notable improvement in loan disbursement with an effort to bring discipline. Similarly, efforts have been made to bring transparency to all banking operations. In the financial year 2017-18, these banks had a total loss of ₹85,390 crore. This situation has changed over ten years, and now their profit has reached ₹1.78 lakh crore.

Of course, this does not mean that public sector banks face no challenges. Throughout the year, the expected growth in deposits did not materialize; whatever growth occurred was sluggish. On the other hand, the increasing number of cybercrimes and scams in banks is a growing concern for both customers and the central government.

Although public sector banks claim to provide customer-centric services on paper, in reality, the general customer experience remains unsatisfactory. Compared to the previous year ending 31 March 2024, the growth in banks by the end of March 2025 has been the highest at 26%. Notably, the State Bank of India, considered the country’s leading bank, has contributed nearly 40% of the total profit. This bank earned a profit of ₹70,901 crore.

Furthermore, Punjab National Bank has recorded an unprecedented growth of 102%. The central government has merged several public sector banks, bringing their current number to 12. The government’s shareholding in these banks is as follows: State Bank of India 57.51%; Bank of Baroda 63.97%; Union Bank of India 74.76%; Punjab National Bank 70.08%; Canara Bank 62.93%; Punjab & Sind Bank 98.25%; Indian Bank 73.84%; Bank of Maharashtra 86.46%; Bank of India 73.38%; Central Bank of India 93.0%; Indian Overseas Bank 96.38%; and UCO Bank 95.39%.

There has also been a significant reduction in the total proportion of non-performing assets (NPAs) of all banks. By the end of March 2025, the NPA ratio has fallen below 3%. Similarly, the capital adequacy ratio has increased to over 15.43% compared to the expected 11.5%.

A major reason for the excellent financial performance of public sector banks is their remarkable success in implementing key government schemes such as PM Mudra, Stand Up India, and PM Svanidhi, which have promoted financial inclusion. Consequently, the number of Jan Dhan accounts has reached 545 million, and more than 520 million collateral-free loans have been sanctioned. Of the Jan Dhan accounts, 56% belong to women.

Today, the State Bank of India is not only the leader among public sector banks but also in the entire banking sector. The market capitalization of its shares is around ₹7.68 lakh crore. SBI alone contributes more than 40% of the total profit of all public sector banks.

Its net profit has reached ₹70,901 crore, a 16% increase over the previous year. Among public sector banks, Punjab National Bank has recorded the highest percentage growth in net profit, with a 102% increase to ₹16,630 crore. Punjab & Sind Bank’s net profit grew by 71% to ₹1,016 crore. Similarly, Union Bank of India’s net profit increased by 31.79% to ₹17,987 crore.

Pune-based Bank of Maharashtra recorded a 36.1% increase in net profit, reaching ₹5,520 crore. Bank of Baroda’s net profit was ₹17,000 crore, and Canara Bank earned a net profit of ₹5,003 crore. Central Bank of India’s net profit grew by 48.4% to ₹3,785 crore. UCO Bank’s profit rose by 47.8% to ₹2,445 crore. Bank of India registered a 45.9% increase in net profit, earning ₹9,219 crore. Indian Bank’s net profit also rose by 35.4% to ₹10,918 crore.

All these banks have made significant progress in loan disbursement, recording a 57.3% increase over the previous year. Last year, their share was 51.7%. This shows that nationalized banks have performed exceptionally well in credit expansion. In comparison, the share of private sector banks has dropped from 46.6% to 39.1% this year.

Another example of these banks’ improved resilience is the improvement in their capital-to-risk-weighted assets ratio, which reached 15.43% by September 2024. According to RBI standards, the minimum expected is 11.50%. This ratio is a testament to the financial strength of the country’s nationalized banks.

As of the end of September 2024, the number of branches of all nationalized banks has increased to 160,501, of which 100,686 branches are in rural and semi-urban areas. The Kisan Credit Card scheme was launched to provide easy short-term crop loans to farmers, and its membership has reached several crore. In the past three years, these banks have disbursed over ₹30 lakh crore in loans to medium and small enterprises, with excellent growth recorded last year.

To further strengthen the financial position of all banks, the central government has implemented various reforms through Enhanced Access and Service Excellence (EASE) to achieve economic development and service excellence through happy customers and flexible banking.

Overall, the decline in gross non-performing assets (GNPA) and the improved capital-to-risk-weighted assets ratio (CRAR) demonstrate the sector’s resilience and robust risk management practices. The institutionalization of reforms, encouragement of prudent lending, and use of technology for better banking services have made the EASE framework significant.

The focus on financial inclusion has increased the availability of banking services. These banks have empowered millions by providing affordable loans with insurance. Although the financial performance of most nationalized banks has been satisfactorily good, they still face various challenges. For example, Bank of Baroda has experienced pressure on its net interest margin (NIM) due to rising deposit costs and tight liquidity, causing it to fall from 3.45% to 3.02% by the end of March 2025.

Additionally, its loan to the airline company ‘Go Air’ is in a stressed situation, increasing the bank’s risk and requiring higher provisioning. Punjab & Sind Bank recorded a 55% decline in annual net profit. Its net profit, which was ₹1,313 crore in March 2024, fell significantly to just ₹595 crore in March 2025.

This highlights the major challenge for all banks to maintain profitability. Overall, the financial year ending March 2025 has been a significant milestone for public sector banks, with record profits and improved financial performance. However, due to various challenges, all banks need to remain vigilant and focus on strategic matters.

Although the central government receives substantial dividends from these nationalized banks, ordinary investors in the stock market have not seen good returns over the past year. In fact, the share prices of many banks have fallen by more than 40% over the year. Furthermore, nationalized banks have become bureaucratic institutions, and genuine, friendly service is still rare in these banks—a reality that cannot be denied.

(The author is a senior financial journalist and former bank director based in Pune.)