Nov 08, 2025, News Desk – Public Sector Banks are entering Q3 FY26 (October–December 2025) on a strong note. After earning ₹49,456 crore in the September quarter, the mood across the PSU banking space is steady — not over-excited, not defensive either.
This time, the focus is not just on profits. It’s on how RBI’s liquidity moves and the government’s credit plans might shape the coming months.
RBI Eases Liquidity, Govt Pushes Credit
The Reserve Bank of India has already started releasing more liquidity into the system through short-term repo operations. That basically means banks are getting easier access to funds — a small but helpful move after a tight festive season. Lower funding costs should help banks protect their margins through Q3.
At the same time, the government has asked large PSU banks to increase lending to MSMEs, housing, and rural borrowers ahead of the 2026 Budget. The idea is simple: keep credit flowing, especially to the small business segment that still drives most of India’s job creation.
These two moves — easier liquidity from the RBI and a credit push from Delhi — set up a comfortable backdrop for PSU banks in the December quarter.
| Factor | What’s Happening | Why It Matters |
|---|---|---|
| RBI Liquidity | Unstable repo operations since late October | Lowers funding pressure, supports margins |
| Govt Credit Push | Focus on MSME & housing disbursals | Keeps loan growth healthy before Budget |
| Credit Growth | It goes 11–12% YoY | Retail and small business lending staying strong |
| Deposit Growth | almost near 9–10% YoY | Funding base stable after festive drawdown |
| NPAs | Below 4% for most PSBs | Cleaner books, less risk pressure |
Banks Ready for a Busy Quarter
SBI is leading the pack as usual, but what stands out is the bank’s strong retail push. Over 60% of new accounts now come from YONO, and digital loans are scaling fast.
Canara Bank has been quietly consistent, growing its retail and MSME book while keeping costs in check.
PNB is finally finding rhythm again — steady growth, fewer slippages, and better credit control.
Indian Bank continues to focus on small-business lending, while IOB and Central Bank of India are showing that even smaller PSBs can grow profitably when they focus on digital and discipline.
| Bank | Q2 FY26 Profit (₹ crore) | Direction | Key Focus Now |
|---|---|---|---|
| SBI | 20,160 | +10% | Retail and digital scale-up |
| Canara Bank | 3,720* | +19% | Strong CASA, MSME expansion |
| PNB | 3,090* | +14% | Controlled credit, better margins |
| Indian Bank | 2,200* | +12% | Lending to small and medium firms |
| IOB | 1,226 | +58% | Digital turnaround story |
| Central Bank of India | 1,213 | +33% | Cost efficiency focus |
| Bank of Baroda | 4,809 | −8% | Hoping for treasury recovery |
| Union Bank | 4,249 | −10% | Margin lift and loan growth |
Data counted from RBI, easemoney research, and other trusted media such as Livemint and NDTV Profit. (SOURCE)
What Could Shape the Numbers
Three things will decide how strong this quarter turns out:
- How far RBI go with liquidity easing? Even a slight change in the cost of funds can shift margins.
- Whether government-backed credit demand actually picks up in the MSME and housing segments.
- How stable bond yields stay. If volatility is low, banks could book better treasury income after a dull Q2.
So far, the early signals look positive on all three fronts. Loan demand hasn’t cooled, deposit pressure has eased, and NPAs are still trending down.
Sum up All
Q3 FY26 won’t just show if PSU banks can repeat their Q2 success — it’ll show how well they can grow under softer policy support and smarter digital play.
With cleaner balance sheets, stronger retail books, and steady margins, India’s state-owned banks seem set for another solid quarter.
If things hold through December, January 2026 could bring one more headline wave:
“PSU Banks Extend Their Profit Run — This Time, Policy Is On Their Side.”
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