. Five Years of Banking Growth: Deposits, Credit and Profits

## 1. Five Years of Banking Growth: Deposits, Credit and Profits The scale of the transformation is visible in the financial results of India's public-sector banks (PSBs). Ministry of Finance figures, based on Reserve Bank of India data, show sustained growth between March 2022 and March 2026. ### Five-year performance of public-sector banks | Financial indicator | March 2022 | March 2026 | |---|---:|---:| | Total business | ₹181.5 lakh crore | ₹283.3 lakh crore | | Total deposits | ₹107.2 lakh crore | ₹156.3 lakh crore | | Loans and advances | ₹74.3 lakh crore | ₹127.0 lakh crore | | Annual net profit | ₹0.67 lakh crore | ₹1.98 lakh crore | | Gross NPA ratio | 7.3% | 1.9% | | Capital adequacy ratio | 14.6% | 16.6% | Source: Ministry of Finance, Government of India, July 2026. [Official five-year banking data](https://www.pib.gov.in/PressReleasePage.aspx?PRID=2290384&lang=1®=3). These figures show a substantial change in the financial position of public-sector banks. Their aggregate business expanded by approximately 56% over the four-year interval, while deposits rose by approximately 46% and loans and advances by approximately 71%. Annual net profit almost tripled. The gross non-performing asset (GNPA) ratio fell from 7.3% to about 1.9%. This indicates a marked improvement in reported asset quality, although low NPAs alone cannot establish that every new loan is sound or that future credit risks have disappeared. The profit figures are annual flows, whereas deposits and business are balance-sheet or business-volume measures at particular dates. They should not be treated as directly interchangeable indicators. ## 2. Why Bank Profits Have Increased Public-sector banks reported a combined net profit of ₹1.98 lakh crore in FY 2025–26, an increase of 11.1% over the preceding year. Their aggregate operating profit reached ₹3.21 lakh crore. The government also reported a cost-to-income ratio of 49.67%, reflecting improved operating efficiency. Several factors help explain the improvement. **First, lower stressed assets have reduced the burden of bad loans.** Better recoveries, improved underwriting and lower fresh slippages can reduce the need for provisions against expected credit losses. **Second, credit expansion has increased the volume of earning assets.** As banks lend to households, businesses, farmers and infrastructure projects, they generate interest income. The resulting profitability depends on lending rates, deposit costs, credit risk and operating expenses. **Third, banks have improved their capital position.** A stronger capital base provides a cushion against losses and supports future lending, subject to regulatory requirements. **Fourth, technology can improve productivity.** Digital onboarding, automated transaction processing, analytics and improved risk monitoring can reduce the cost of routine services and help banks process larger volumes. These developments do not mean that profitability will rise every year. Banks remain exposed to changing interest rates, deposit competition, loan defaults, fraud, cybersecurity risks and economic slowdowns. ## 3. Deposits: The Foundation of Banking Strength Deposits are central to a bank's capacity to lend. Public-sector bank deposits increased from ₹107.2 lakh crore in March 2022 to ₹156.3 lakh crore in March 2026. In FY 2025–26 alone, deposits grew by 10.6% year on year. This growth is important because banks need stable funding to support credit demand. Yet deposit growth is not equivalent to profit growth. Banks must pay interest to depositors and maintain liquidity and regulatory reserves. If deposit rates rise faster than lending yields, net interest margins can narrow. The strategic challenge is therefore to attract deposits at sustainable costs while maintaining customer confidence. Customers also need to distinguish between a bank's financial strength and the return offered on a particular deposit. A bank's deposit rate should be evaluated alongside tenure, liquidity needs, applicable premature-withdrawal terms and the relevant deposit-insurance rules. ## 4. Lending to Households, Agriculture and MSMEs The expansion of bank credit matters most when it finances productive activity rather than merely increasing balance-sheet size. In FY 2025–26, public-sector bank credit growth included: - Retail loans: 19.8% year on year. - Agriculture and allied activities: 16.2%. - MSME loans: 19.6%. - Infrastructure loans in the industries segment: 4.9%. These figures are reported by the Ministry of Finance using RBI data. Retail credit can support housing, education and consumption, although excessive household leverage can create financial stress. Agricultural lending can support cultivation, irrigation and farm investment, but it must account for weather risk, crop prices and repayment capacity. MSME lending can help smaller enterprises purchase equipment, hire workers and manage working capital. For India, the policy objective should be to combine credit expansion with responsible underwriting. Lending growth is economically useful when it improves productive capacity, business survival, employment and household resilience without creating another cycle of excessive leverage and bad loans. ## 5. Digital Banking: Technology as a Productivity Engine Digital banking has changed how customers make payments, transfer money, access account information and interact with financial institutions. UPI, mobile banking, internet banking, automated service channels and data-driven risk systems have helped expand the reach of formal finance. Technology can deliver several benefits: 1. **Lower transaction costs:** Routine payments and transfers can be processed without every transaction requiring branch intervention. 2. **Wider access:** Customers in remote and underserved areas can use digital channels where connectivity and infrastructure permit. 3. **Faster service:** Automated workflows can reduce processing time for selected services. 4. **Improved monitoring:** Analytics can help detect unusual transactions and identify emerging credit risks. 5. **More efficient operations:** Digital records and automated reconciliation can reduce some manual work. However, digitalisation does not eliminate the need for branches or trained staff. Customers may still require help with complex lending, disputes, fraud reports, cash services, documentation and financial literacy. Digital exclusion, connectivity failures, cybercrime and outages also remain important risks. The objective should be a hybrid banking model: efficient digital services combined with accessible human support. ## 6. Nifty Bank and BSE Bankex: What Five-Year Returns Tell Us Banking-sector performance is also reflected in stock-market indices, although stock-market returns measure investor experience rather than the direct financial performance of banks. The **Nifty Bank** index tracks a selection of liquid, large-capitalisation banking stocks listed on the National Stock Exchange. The **BSE Bankex** tracks banking-sector stocks on the Bombay Stock Exchange. A snapshot available for BSE Bankex dated 1 October 2026 reported a five-year price return of approximately 44.34%. A separate Nifty Bank factsheet reports five-year price and total-return measures, with the relevant return methodology and factsheet date needing to be checked before making a direct comparison. [Nifty Bank official index page](https://www.niftyindices.com/indices/equity/sectoral-indices/nifty-bank) · [BSE Bankex historical returns](https://dhan.co/indices/bse-bankex-share-price/). These numbers must be interpreted carefully: - **Price return** measures changes in index levels and generally excludes reinvested dividends. - **Total return** includes the effect of dividends under the index's methodology. - A five-year cumulative return is different from an annualised return. - Index constituents and weights change over time. - Stock prices reflect future expectations, valuation and risk—not simply the profits already reported by banks. A bank can report rising profits while its share price falls if investors had expected even stronger results. Conversely, a share price can rise ahead of reported earnings if markets anticipate future improvement. For a rigorous five-year analysis, Nifty Bank and BSE Bankex should be compared over the same start and end dates, using either price-return measures for both or total-return measures for both. The analysis should also compare the indices with a broad market benchmark and consider volatility and valuation. ## 7. Performance-Linked Incentives: Rewarding Results Without Distorting Priorities Performance-linked incentives (PLI) are designed to connect some employee or executive remuneration to defined performance outcomes. In banking, the central question is which outcomes should determine rewards. A well-designed scheme may recognise profitability, productivity, service quality, risk management, compliance and sustainable growth. But an incentive system based mainly on short-term profit or loan volumes can encourage excessive risk-taking, aggressive selling or the neglect of customer interests. For this reason, the design of banking incentives should consider both financial and non-financial measures. A balanced scorecard could include: - Sustainable profitability over multiple years. - Credit quality and risk-adjusted returns. - Compliance and audit outcomes. - Customer service and grievance resolution. - Digital reliability and fraud prevention. - Responsible lending and financial inclusion. - Employee development and operational resilience. In September 2026, the Ministry of Finance announced that the PLI scheme applicable to executives of public-sector banks for FY 2025–26 would be kept in abeyance in response to employee concerns, with the issue to be taken up during ongoing bipartite settlement and joint-note discussions. This is an important distinction: the scheme's suspension does not mean that the banking sector has abandoned performance measurement. Rather, it places the design and acceptability of the incentive framework within a broader employment-relations discussion. A sustainable approach should reward good performance without weakening prudential discipline or treating short-term accounting results as the only measure of institutional success. ## 8. The Five-Day Banking Week: Employee Welfare and Public Access The demand for a five-day banking week has become a prominent issue in 2026. The proposal concerns the transition from the existing arrangement—under which the second and fourth Saturdays are public holidays—to a system in which all Saturdays are non-working days for bank branches. The debate involves more than the number of working days. It touches employee welfare, working hours, customer convenience, business continuity and the role of digital services. The Ministry of Finance stated on 21 September 2026 that the five-day workweek remained under consideration and that an indefinite strike had been proposed from 26 October. The proposed strike dates of 28–30 September were subsequently reported as deferred following discussions between unions and the Indian Banks' Association, with a committee expected to address outstanding issues. The implementation status should therefore be checked against the latest official notification rather than assumed from the proposal alone. ### The issues on each side **Employee and union concerns** may include work-life balance, fatigue, staffing pressures, time for training and the relationship between working conditions and service quality. **Customer and business concerns** include access to cash and branch services, cheque processing, trade documentation, government transactions and support for customers who cannot rely exclusively on digital channels. **Management and policy concerns** include operating costs, service continuity, staff deployment, settlement systems and the ability to meet customer demand across the working week. The five-day-week question should be assessed using evidence on workload, productivity, customer footfall, digital-service adoption, transaction backlogs and staffing. It should not be reduced to a simple assumption that fewer branch days automatically increase or decrease productivity. A transition could be accompanied by stronger digital support, carefully planned staffing, clear public communication and suitable arrangements for essential services. Any revised schedule should also make the actual working hours and customer-service arrangements clear. ## 9. Does Banking-Sector Growth Mean the Fortune of Banks Is Rising? The evidence supports a substantial improvement in the financial position of public-sector banks over the period examined. Profits have risen, deposits and advances have expanded, and reported non-performing assets have declined. Capital adequacy has also strengthened. However, a bank's long-term fortunes depend on more than a single period of high profits. Four tests are particularly important. **First, profitability must be sustainable.** Earnings should be supported by sound lending, manageable funding costs and prudent provisioning. **Second, growth must create economic value.** Credit should finance viable households and businesses, support productivity and help sustain employment. **Third, technology must improve service without excluding customers.** Cybersecurity, fraud prevention, accessibility and human support are essential complements to digitalisation. **Fourth, governance must balance incentives and accountability.** Bank leadership, employees, regulators and policymakers need performance measures that recognise both commercial results and the public importance of banking. Stock-market indices add another perspective by showing how investors value listed banks. But index performance, accounting profits, deposits and customer welfare are different indicators. A complete assessment needs all of them rather than a single headline number. ## 10. A Practical Framework for the Next Phase India's banking policy and management agenda can be organised around five priorities: 1. **Strengthen productive credit:** Improve access to well-assessed loans for MSMEs, agriculture, infrastructure and viable household needs. 2. **Protect deposit confidence:** Maintain prudent liquidity, capital, governance and risk-management standards. 3. **Invest in technology responsibly:** Improve reliability, cybersecurity, fraud detection and customer support. 4. **Align incentives with sustainable outcomes:** Include risk, compliance, service quality and long-term performance in executive and employee frameworks. 5. **Plan working arrangements around evidence:** Evaluate five-day banking through operational data and customer needs, with transparent communication and continuity arrangements. These priorities reinforce one another. Better technology can improve productivity; better productivity can support service quality; stronger risk management can protect profitability; and responsible lending can translate bank resources into economic activity. ## Conclusion India's public-sector banks have recorded a significant improvement over the last five years. Between March 2022 and March 2026, aggregate deposits rose from ₹107.2 lakh crore to ₹156.3 lakh crore, annual net profits increased from ₹0.67 lakh crore to ₹1.98 lakh crore, and the gross NPA ratio fell from 7.3% to approximately 1.9%. The next phase will require more than continued expansion. Banks must preserve depositor confidence, lend productively, manage risks, invest in technology and maintain dependable customer access. At the same time, questions about performance-linked incentives and a five-day working week need to be resolved through transparent consultation and operational evidence. **The real measure of banking success is not profit alone. It is the ability to combine financial strength, responsible credit, technological efficiency, employee capability and reliable public service over the long term.** ### References 1. Ministry of Finance, Government of India, *Public Sector Banks record an all-time high net profit of ₹1.98 lakh crore in FY 2025–26*, 12 May 2026: https://www.pib.gov.in/PressReleasePage.aspx?PRID=2260203 2. Ministry of Finance, Government of India, *Financial performance metrics of public-sector banks for the last five years*, 28 July 2026: https://www.pib.gov.in/PressReleasePage.aspx?PRID=2290384 3. Ministry of Finance, Government of India, *Appeal to Employees of Public Sector Banks and Regional Rural Banks for Ensuring Uninterrupted Banking Services*, 21 September 2026: https://www.pib.gov.in/PressReleasePage.aspx?PRID=2313186 4. National Stock Exchange Indices, Nifty Bank: https://www.niftyindices.com/indices/equity/sectoral-indices/nifty-bank 5. BSE Bankex historical performance reference: https://dhan.co/indices/bse-bankex-share-price/ *Editorial note: Financial figures refer to the specified dates and reporting periods. Index returns depend on the measurement date and methodology. The five-day banking proposal and performance-linked incentive discussions are evolving matters; verify their status before publication.*