Secretary, Department Financial Services reviews performance of Public Sector Banks for FY 2025–26

1. At a Glance

• Public Sector Banks (PSBs) recorded their highest-ever net profit of ₹1.98 lakh crore in FY 2025–26, the fourth consecutive year of profitability [S1][S2].
• Aggregate business of PSBs touched ₹283 lakh crore, with GNPA at a historic low of 1.93% and NNPA at 0.39% [S1].
• Reflects the cumulative payoff of a decade-long banking reform cycle — 4R strategy, EASE reforms, IBC, bank recapitalisation, PSB amalgamation — a recurring UPSC theme linking banking, economy, and governance (GS-III).
• Review chaired by Secretary, DFS, Shri M. Nagaraju; also saw launch of a revamped DFS website and a coffee-table book on unclaimed financial assets ("Aapki Poonji, Aapka Adhikar") [S1].

2. Why in the News

• On 29 May 2026, DFS Secretary chaired the annual/periodic PSB performance review meeting for FY 2025–26, releasing headline financial results and launching citizen-facing digital/awareness initiatives [S1].

3. Background & Evolution

• PSBs originated from bank nationalisation (14 banks in 1969, 6 more in 1980); reform trajectory since mid-2010s addressed the Twin Balance Sheet problem (over-leveraged corporates + NPA-laden banks).
• 2015 onward: Indradhanush Plan → recapitalisation; Insolvency and Bankruptcy Code (IBC) enacted for faster resolution; NARCL (bad bank) set up for aggregated stressed-asset resolution [S3].
• EASE (Enhanced Access & Service Excellence) reform agenda launched to institutionalise incremental, measurable reforms in PSBs — now in its 8th edition (EASE 8.0), covering governance, prudent lending, risk management, tech/data-driven banking, and HR reforms [S3].
• PSB amalgamation (e.g., mergers reducing PSB count from 27 to 12) consolidated balance sheets and improved scale economies [S3].
• GNPA trajectory: from a peak of 14.58% (Mar-2018) to 3.12% (Sep-2024) to 1.93% (FY 2025–26) — a multi-year clean-up story [S1].
• CRAR (Capital to Risk-weighted Assets Ratio) rose 401 bps, from 11.45% (Mar-2015) to 15.46% (Dec-2025) [S3].

4. Core Static Facts

5. Multi-Dimensional Analysis

Economic - Record PSB profitability strengthens fiscal position by reducing/eliminating need for government recapitalisation infusions, freeing fiscal space. - Low GNPA/NNPA signals improved credit allocation efficiency, supporting sustainable MSME and priority-sector credit flow [S1].

Governance/Administrative - EASE reforms institutionalise measurable, incremental governance benchmarks (board oversight, risk management, cyber resilience) rather than one-off fixes [S3]. - Review process itself (Secretary-level periodic reviews) is a governance/accountability mechanism ensuring continuous monitoring of financial-sector PSUs.

Legal/Institutional - IBC (2016) provided the legal backbone for time-bound insolvency resolution, directly driving NPA reduction. - NARCL, structured as an ARC, aggregates and resolves large stressed assets outside individual bank balance sheets [S3].

Social - Financial inclusion and tracing/restitution of unclaimed financial assets (highlighted via the coffee-table book) protects retail depositors' rights, especially vulnerable/elderly account holders [S1].

Technological - Emphasis on digital ecosystem, cyber resilience and revamped multilingual, accessible DFS website reflects push toward tech-enabled, citizen-centric banking [S1].

6. Recent Developments (last 12–18 months)

• 29 May 2026: DFS Secretary review of PSB performance for FY 2025–26; record ₹1.98 lakh crore net profit announced [S1][S2].
• 30 June 2026: RBI released its Financial Stability Report, June 2026, covering sectoral asset quality and GNPA projections for banks [S4].
• EASE 8.0 reform agenda progress reviewed, continuing the annual EASE reform cycle [S3].
• Earlier review: H1 FY 2025–26 PSB review meeting also chaired by DFS Secretary (precursor to the full-year review) [S1].

7. Prelims Hooks

• PSB net profit in FY 2025–26: ₹1.98 lakh crore — highest ever, 4th consecutive profitable year [S1].
• Aggregate PSB business, FY 2025–26: ₹283 lakh crore [S1].
• GNPA of PSBs at historic low: 1.93%; NNPA: 0.39% [S1].
• Nodal review authority: Secretary, Department of Financial Services (DFS), not RBI Governor.
• Current DFS Secretary (as per this review): Shri M. Nagaraju.
• GNPA peak was 14.58% in March 2018; fell to 3.12% by Sep-2024 [S1].
• CRAR improved by 401 bps — from 11.45% (Mar-2015) to 15.46% (Dec-2025) [S3].
• EASE = Enhanced Access & Service Excellence; current edition is EASE 8.0 [S3].
• Coffee table book unveiled: "Aapki Poonji, Aapka Adhikar" (Your Money, Your Right) — theme: unclaimed financial assets [S1].
• Number of nationalised bank waves: 1969 (14 banks) and 1980 (6 banks) — background static fact.
• Key institutional reform tools cited: IBC, NARCL, PSB amalgamation, EASE [S3].
• RBI's Financial Stability Report (latest: June 2026) is the authoritative source tracking system-wide GNPA/CRAR trends [S4].

8. Mains Relevance

• GS-III: Indian Economy — banking sector, NPAs, mobilisation of resources, growth & development.
• Syllabus heading: "Indian Economy and issues relating to planning, mobilization of resources, growth, development" and "Effects of liberalization on the economy, changes in industrial policy."
• Possible question stems: 1. "Discuss the reforms undertaken since 2015 that have enabled Public Sector Banks to record their highest-ever profitability. Are these gains structurally sustainable?" 2. "Examine the role of IBC, NARCL and PSB amalgamation in addressing India's twin balance sheet problem." 3. "Critically evaluate the EASE reform framework as a governance tool for Public Sector Bank accountability."

9. Related Topics to Study Next

• Insolvency and Bankruptcy Code (IBC), 2016 — legal engine behind NPA resolution.
• National Asset Reconstruction Company Ltd. (NARCL) — "bad bank" mechanism for stressed assets.
• Bank Nationalisation (1969, 1980) — historical origin of PSBs.
• PSB Amalgamation/Mergers — consolidation from 27 to 12 PSBs.
• RBI Financial Stability Report — authoritative half-yearly banking-sector health tracker.
• Twin Balance Sheet Problem — conceptual backbone for understanding pre-reform NPA crisis.
• Financial Inclusion schemes (PMJDY, Jan Suraksha schemes) — linked to PSB social mandate.
• Basel III norms/CRAR — capital adequacy framework underlying bank soundness metrics.

10. Common Errors / Trap Areas

• Confusing DFS Secretary-led review with the Finance Minister's annual PSB review (a separate, higher-level event) — note both exist; this note concerns the DFS Secretary's review [S1].
• Mixing up GNPA vs NNPA — GNPA (1.93%) is gross; NNPA (0.39%) is net of provisions — commonly confused in MCQs.
• Attributing PSB reforms solely to RBI — most structural reforms (EASE, recap, amalgamation) are DFS/Finance Ministry driven, RBI's role is regulatory/supervisory (e.g., Financial Stability Report).
• Assuming NARCL is a government department — it is a company (ARC), not a ministry body.
• Conflating EASE reforms with PSB amalgamation — EASE is a continuous governance framework; amalgamation was a distinct one-time consolidation exercise.

11. Sources

• [S1] Secretary, Department Financial Services reviews performance of Public Sector Banks for FY 2025–26 — https://www.pib.gov.in/PressReleasePage.aspx?PRID=2266716&reg=3&lang=1 — (tier: 1)
• [S2] Public Sector Banks (PSBs) record an all-time high net profit of ₹1.98 lakh crore in FY 2025–26 — https://www.pib.gov.in/PressReleasePage.aspx?PRID=2260203&reg=3&lang=1 — (tier: 1)
• [S3] EASE 8.0 Reform Agenda Advances Transformation of Public Sector Banks — https://www.pib.gov.in/PressReleasePage.aspx?PRID=2237483&reg=3&lang=1 — (tier: 1)
• [S4] Financial Stability Report, June 2026 — Reserve Bank of India — https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/0FSRJUNE2026_300626A120EF6C37694C8C933181147F1379D7.PDF — (tier: 1)