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SCBs Post 1.4% Profit Rise Amid Margin Pressure—PSBs Lead Growth

Scheduled Commercial Banks posted a modest 1.4% year-on-year net profit growth in Q2FY26. Public sector banks led the way with a 4.7% rise, while private banks saw a 2.1% decline. Profitability was supported by fee income and controlled expenses, but margins remained under pressure. Analysts expect improvement in the second half due to festive demand and credit growth.

Key Points: SCB Net Profit Rises 1.4% in Q2FY26 as PSBs Outperform

  • PSBs recorded 4.7% YoY profit growth driven by fee income and treasury gains
  • Private banks saw profits fall 2.1% amid slower corporate loan demand
  • Return on assets for SCBs declined to 1.29% due to margin pressures
  • CareEdge forecasts H2FY26 improvement with festive demand and credit growth
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SCBs post 1.4 pc surge in net profit in Q2FY26 led by PSBs

SCBs see 1.4% YoY profit growth in Q2FY26, driven by PSBs' fee income and treasury gains, while PVBs face margin compression and higher provisions.

"The core operating performance of SCBs remained under pressure, with elevated deposit costs and slower CASA mobilisation keeping NII and NIM growth muted. – Sanjay Agarwal, CareEdge Ratings"

New Delhi, Nov 28

The net profit of Scheduled Commercial Banks (SCBs) grew marginally by 1.4 per cent year-on-year in Q2FY26, with gains driven by fee income, reduced provisions, and controlled operating expenses, even as margins compressed, a report said on Friday.

Net profit of SCBs grew 2.5 per cent sequentially to Rs 0.94 lakh crore in Q2FY26. Public sector banks (PSBs) recorded a 4.7 per cent year‑on‑year rise in net profit to Rs 0.50 lakh crore, while private sector banks (PVBs) saw profits fall 2.1 per cent to Rs 0.44 lakh crore, the report from CareEdge Ratings said.

The rise in PSB profits is mainly attributed to fee income and treasury gains, alongside credit growth in the retail and MSME segments, and normalised operating expenses.

Further, the inclusion of recent stake‑sale effects would lift large PSBs’ profits by 8.9 per cent YoY. PVBs faced slower corporate loan demand, flat growth in interest income, continued stress in the microfinance and unsecured segments, and increased provisions.

If a one-off regulatory provision is included, net profit for PVBs would have declined by an additional 4 per cent YoY.

Return on assets for SCBs stood at an annualised 1.29 per cent in Q2FY26, down 11 basis points year‑on‑year, attributed to margin pressures due to rate cuts.

Sequentially, it grew by one bps, attributed to slightly increased margins of PSBs in the current quarter, business growth, and overall improvement in the asset quality.

Sanjay Agarwal, Senior Director, CareEdge Ratings, said that the core operating performance of SCBs remained under pressure, with elevated deposit costs and slower CASA mobilisation keeping NII and NIM growth muted.

The ratings agency forecasted that profitability would improve in H2FY26, supported by festive-season demand, credit growth, the benefit from a lower CRR requirement, and a gradual normalisation of unsecured and MFI segment slippages.

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- IANS

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Reader Comments

R
Rohit P
But why are private banks struggling? 2.1% decline is concerning. As someone with accounts in both PSB and private bank, I've noticed service quality differences. Maybe private banks need to focus more on retail customers like us.
S
Sanjay N
The numbers look good but I hope this profit growth translates to better services for common people. Still waiting hours in bank queues for simple transactions. Profit should mean better customer experience too!
A
Anjali F
MSME and retail credit growth driving profits is excellent news! As a small business owner, I've seen easier loan approvals recently. This shows the government's focus on supporting small businesses is working 👍
M
Michael C
While the growth is modest, the stability in banking sector is crucial for foreign investments. The improved asset quality mentioned here gives confidence to international investors looking at India.
K
Karthik V
The margin pressure due to rate cuts is worrying. As a depositor, I'm already getting lower interest on my FDs. Hope banks balance profitability with fair returns for customers too.

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