India's banking system has two big players with very different histories. The public sector banks (PSBs), twelve banks majority-owned by the Government of India, still hold close to three-fifths of all deposits. The private sector banks (PVBs), 21 of them led by HDFC Bank and ICICI Bank, have been taking market share from them for more than a decade. This part compares the two groups: the laws that create them, who owns and runs them, how their market shares, bad loans and profits have moved since 2016, what the government spent to rescue the PSBs, how far privatisation has got, and the social duties that only the PSBs carry in full. It ends with the FY26 numbers: record PSB profits of ₹1.98 lakh crore and the lowest PSB bad-loan ratio on record.
Part 21, the structure of the Indian banking system, lists the 12 PSBs and gives the end-March 2025 market shares. The mergers that cut the PSBs from 27 to 12 are in Part 38, bank mergers and consolidation, and the bad-loan cycle in detail is in Part 25, NPAs and bad loans. The RBI's ownership rules for private banks (the 26% promoter cap and Section 12B) are in Part 18, RBI regulation of banks and NBFCs.
In the news
- 14 October 2026: IDBI Bank sale cleared. The Cabinet Committee on Economic Affairs approved a Fairfax Financial Holdings entity (10955230 Canada Inc.) as buyer of 60.72% of IDBI Bank (30.48% from the government, 30.24% from LIC) for ₹52,878 crore, or ₹81 a share. The government keeps 15% and LIC 19%. The buyer must still pass the RBI's fit-and-proper review. Why it matters for the exam: it will be the first sale of a government-controlled bank to a strategic buyer since the 2021 privatisation announcement, and the government calls it the largest FDI in Indian finance so far.
- 14 October 2026: Jan Dhan crosses 59.5 crore accounts. The PMJDY dashboard showed 59.59 crore accounts holding ₹3.24 lakh crore. PSBs held 45.84 crore of them (77%), RRBs 11.18 crore and private banks only 2.38 crore (4%). Why it matters for the exam: it is the clearest single number for the PSBs' social role.
- 1 August 2026: PSBs' exemption from 25% public shareholding expires. A government notification of 19 July 2024 had exempted listed public sector companies, including PSBs, from SEBI's 25% minimum public shareholding rule until 1 August 2026. Why it matters for the exam: five PSBs still had government stakes above 75% at end-March 2025.
- 29 May 2026: PSBs regain credit share. The RBI's annual BSR data showed bank credit growing 14.1% in 2025-26. PSB credit grew faster than that, private bank credit by only 12.3%. On deposits, PSBs won 50.8% of the new money and private banks 38.6%. Why it matters for the exam: after a decade of losing share, PSBs gained loan share in FY26, though their share of the new deposits was still below their share of the stock.
- 12 May 2026: PSBs post record ₹1.98 lakh crore profit. The Finance Ministry said PSB net profit rose 11.1% to ₹1.98 lakh crore in FY26, the fourth year of profits in a row, with gross NPAs at 1.93%, net NPAs at 0.39%, CRAR at 16.6% and a cost-to-income ratio of 49.67%. Why it matters for the exam: every one of these is a likely question.
- 8 January 2026: IDBI bids invited, then rejected. The first financial bids fell short of the reserve price of ₹94.42 a share and were not approved; best-offer bids were invited again on 18 May 2026. Why it matters for the exam: it shows how a strategic sale works: reserve price, independent valuers and a ministerial "Alternative Mechanism".
- 29 December 2025: Trend and Progress report. The RBI's report for 2024-25 showed PSBs' share of advances rising to 56.2% while their deposit share fell to 58.8%. PSB return on assets and return on equity improved, while private banks' fell. Why it matters for the exam: it is the statutory source (under Section 36(2) of the BR Act) for all bank-group comparisons.
Two kinds of bank, two kinds of law
How PSBs came to be
Public sector banking in India began with the State Bank of India, created out of the Imperial Bank of India by the State Bank of India Act, 1955. The rest came by nationalisation:
- 19 July 1969: 14 banks with deposits of at least ₹50 crore were nationalised by ordinance, later the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970.
- 15 April 1980: six more, with deposits of at least ₹200 crore, under the 1980 Act of the same name.
These two "Acquisition Acts" are still the charters of the 11 nationalised banks. The banks are not companies under the Companies Act; they are "corresponding new banks" created by statute, and their boards, capital and government shareholding are set by the Acts and by schemes made under them. That is why privatising a nationalised bank needs Parliament to amend the Acts, while selling IDBI Bank (a company) did not.
Mergers cut the number of PSBs from 27 in 2017 to 12 from 1 April 2020. IDBI Bank stopped being a PSB on 21 January 2019, when LIC took 51% and the RBI reclassified it as a private bank.
How private banks are governed
Private banks are ordinary companies under the Companies Act, 2013, licensed under Section 22 of the Banking Regulation Act, 1949. The BR Act applies to them in full: the RBI approves anyone buying 5% or more (Section 12B), approves the appointment and pay of the managing director and CEO (Section 35B), and can remove managers (Section 36AA) or supersede the board (Section 36ACA). It used these powers at Yes Bank in March 2020.
For PSBs, Section 51 of the BR Act applies only a list of its sections. The RBI regulates PSBs on capital, liquidity, NPAs and conduct exactly as it does private banks, but it cannot cancel a PSB's licence, force a merger or sell the bank. Those are matters for the government as owner. The RBI's leaders have often argued that this "dual control" leaves PSBs less tightly supervised than private banks.
Who appoints the bosses
In a private bank, the board picks the CEO and the RBI approves the choice. In a PSB, the government appoints the chairman, managing director and executive directors, on the recommendation of a search body:
- The Banks Board Bureau (BBB), set up in 2016 after the P. J. Nayak Committee (2014) criticised government control of PSB boards, interviewed and recommended candidates.
- After a Delhi High Court ruling in 2021 that the BBB was not a legally competent body to select directors of public sector insurers, the government replaced it with the Financial Services Institutions Bureau (FSIB), constituted with effect from 1 July 2022.
- The FSIB recommends whole-time directors and non-executive chairpersons for PSBs, public sector financial institutions and public sector insurers. Its members include the Secretaries of the Department of Financial Services (Sanjay Lohiya since 1 June 2026) and the Department of Public Enterprises. The final decision rests with the Appointments Committee of the Cabinet.
Ownership and foreign investment
The government must hold at least 51% of every nationalised bank under the Acquisition Acts (and of SBI under the SBI Act). At end-March 2025 its stakes ranged from 57.0% in SBI and 62.9% in Canara Bank to 94.6% in Indian Overseas Bank and 93.9% in Punjab & Sind Bank. Private banks are widely held: HDFC Bank and ICICI Bank were more than 55% owned by non-residents.
The aggregate foreign investment limit is 20% for PSBs and 74% for private banks, so a PSB can never be majority foreign-owned without a change in the law.
Market share: a decade of drift
Using the RBI's consolidated balance sheets of scheduled commercial banks (built from annual accounts, excluding RRBs):
| End-March | PSB deposits | PVB deposits | PSB advances | PVB advances |
|---|---|---|---|---|
| 2016 | 74.2% | 21.3% | 70.8% | 24.6% |
| 2018 | 70.1% | 25.6% | 65.1% | 30.4% |
| 2019 | 65.8% | 29.3% | 61.0% | 34.3% |
| 2021 | 63.5% | 30.8% | 58.7% | 36.4% |
| 2023 | 61.4% | 33.0% | 57.9% | 37.5% |
| 2024 | 59.4% | 34.8% | 55.5% | 40.0% |
| 2025 | 58.8% | 35.2% | 56.2% | 39.1% |
Three forces drove the shift:
- The bad-loan crisis. From 2015 to 2021, weak PSBs were short of capital. Many of them, including IDBI Bank from May 2017, were put under the RBI's Prompt Corrective Action framework, which restricted their lending. Private banks lent into the gap.
- One-off events. IDBI Bank's move to the private group in 2019 shifted roughly 2 percentage points of loans at a stroke. The merger of HDFC Ltd into HDFC Bank on 1 July 2023 pushed private banks' advances share to 40.0% in March 2024.
- Retail and digital. Private banks grew faster in housing, cards and personal loans, and in the current and savings accounts of urban and corporate customers.
The trend paused in 2024-25 and reversed in loans in 2025-26. Strong PSB balance sheets let them lend more: the BSR data show PSB credit growing faster than the overall 14.1%, and PIB data show PSB gross advances up 15.7% to ₹127 lakh crore. Deposits are another story: PSBs took only 50.8% of the increase in deposits in FY26, below their share of the stock, so their deposit share fell again.
Worked example: share of the increase. Suppose total deposits rise by ₹25 lakh crore and PSBs take 50.8% of it, ₹12.7 lakh crore. If PSBs started with 58.8% of ₹241.5 lakh crore (₹142.0 lakh crore), they end with ₹154.7 lakh crore out of ₹266.5 lakh crore, a share of 154.7 ÷ 266.5 = 58.0%. Any year in which a group's share of the increase is below its share of the stock, its market share falls.
Asset quality: the great clean-up
| End-March | PSBs | Private banks | All SCBs |
|---|---|---|---|
| 2016 | 9.3% | 2.8% | 7.5% |
| 2017 | 11.7% | 4.1% | 9.3% |
| 2018 | 14.6% | 4.7% | 11.2% |
| 2019 | 11.6% | 5.3% | 9.1% |
| 2020 | 10.3% | 5.5% | 8.2% |
| 2021 | 9.1% | 4.9% | 7.3% |
| 2022 | 7.3% | 3.8% | 5.8% |
| 2023 | 5.0% | 2.3% | 3.9% |
| 2024 | 3.5% | 1.9% | 2.7% |
| 2025 | 2.6% | 1.8% | 2.2% |
| 2026 | 1.93% | n.a. | 1.8% |
(Trend and Progress figures; 2026 PSB figure from the Finance Ministry, all-SCB figure from the June 2026 FSR, which uses supervisory returns and gives slightly different numbers for earlier years, such as 11.5% for March 2018.)
The PSB problem was mostly large corporate loans to infrastructure, power, steel and telecom made in the 2008–2012 boom. The RBI's Asset Quality Review of 2015-16 forced banks to recognise them, so NPA ratios jumped. The fall since 2018 came from four things: recoveries under the IBC, heavy write-offs (PSBs wrote off ₹91,176 crore in 2024-25 alone), capital from the government to absorb losses, and much cleaner new lending. Every PSB now has a provision coverage ratio above 90%, and the PSB net NPA ratio was 0.39% in March 2026.
Private banks never had a crisis on the same scale, but they had bank-specific ones: Yes Bank (2020), and the stresses at ICICI Bank and Axis Bank around 2017-18. Their GNPA in 2024-25 (1.8%) was close to the PSBs' (2.6%), and their slippages now come more from unsecured retail and credit cards.
Profits: from ₹85,000 crore loss to ₹1.98 lakh crore profit
| Year | PSB net profit (₹ crore) |
|---|---|
| 2015-16 | −17,993 |
| 2016-17 | −11,389 |
| 2017-18 | −85,370 |
| 2018-19 | −66,636 |
| 2019-20 | −25,941 |
| 2020-21 | 31,820 |
| 2021-22 | 66,539 |
| 2022-23 | 1,04,649 |
| 2023-24 | 1,41,203 |
| 2024-25 | 1,78,364 |
| 2025-26 | about 1,98,000 |
The loss years were not caused by weak operations. In 2017-18 PSBs made an operating profit of ₹1,55,603 crore but had to set aside ₹2,40,973 crore for bad loans and other provisions. Once provisions fell, the operating profit showed through.
Profits are concentrated: SBI alone earned more than 40% of the PSB total in FY25. And in 2024-25 the 21 private banks together still earned more (₹1,89,211 crore) than the 12 PSBs (₹1,78,364 crore), on a balance sheet about two-thirds the size.
Return on assets and return on equity
| Year | PSB RoA | PVB RoA | PSB RoE | PVB RoE |
|---|---|---|---|---|
| 2014-15 | 0.46% | 1.68% | 7.8% | 15.7% |
| 2017-18 | −0.84% | 1.14% | −14.6% | 10.1% |
| 2018-19 | −0.65% | 0.63% | −11.4% | 5.5% |
| 2022-23* | 0.78% | 1.57% | 12.4% | 13.7% |
| 2023-24* | 0.96% | 1.85% | 14.7% | 15.8% |
| 2024-25* | 1.09% | 1.71% | 15.9% | 14.0% |
*Starred years are calculated here from RBI data on net profit, total assets and capital plus reserves (averages of opening and closing balances). The RBI's own published ratios may differ slightly.
Worked example: why PSB RoE can beat private banks with a lower RoA. RoE = RoA × leverage, where leverage = average assets ÷ average equity.
- PSBs, 2024-25: average assets = (₹1,54,93,234 + ₹1,71,41,751) ÷ 2 = ₹1,63,17,492 crore. Average equity = (₹10,29,794 + ₹12,08,132) ÷ 2 = ₹11,18,963 crore. Leverage = 1,63,17,492 ÷ 11,18,963 = 14.6 times. RoA = 1,78,364 ÷ 1,63,17,492 = 1.09%. RoE = 1.09% × 14.6 = 15.9%.
- Private banks: average assets ₹1,10,52,109 crore, average equity ₹13,50,248 crore, so leverage = 8.2 times. RoA = 1,89,211 ÷ 1,10,52,109 = 1.71%. RoE = 1.71% × 8.2 = 14.0%.
PSBs earn less on each rupee of assets but run on thinner capital. Private banks hold more capital than they need, partly because markets and the RBI expect it.
Efficiency, deposits and margins
Cost-to-income
The cost-to-income ratio is operating expenses ÷ (net interest income + other income). Lower is better.
Worked example (2024-25, ₹ crore).
- PSBs: 3,03,100 ÷ (4,29,128 + 1,75,951) = 3,03,100 ÷ 6,05,079 = 50.1%
- Private banks: 2,61,471 ÷ (4,01,683 + 1,60,149) = 2,61,471 ÷ 5,61,832 = 46.5%
The Finance Ministry put the PSB ratio at 49.67% for 2025-26. The gap has narrowed: on the same method it was 50.7% for PSBs against 41.6% for private banks in 2020-21.
Staff costs
The biggest difference is in wages. PSBs' wage bill was ₹1,77,894 crore in 2024-25, 58.7% of their operating expenses. Private banks' was ₹98,841 crore, or 37.8%. PSB pay is set industry-wide through bipartite settlements negotiated by the Indian Banks' Association with the unions, and comes with defined-benefit pensions for older staff. The PSB wage bill jumped 27.2% in 2023-24, the year a wage revision was provided for, and then fell 3.3% in 2024-25. Private banks pay market rates, use more variable pay (46% of MD and CEO pay was variable at end-March 2024) and outsource more. PSBs also run large rural branch networks that cost more per rupee of business.
CASA and cost of funds
CASA (current plus savings deposits) is cheap money. Calculated from the RBI balance sheets:
| End-March | PSB CASA ratio | PVB CASA ratio |
|---|---|---|
| 2021 | 41.9% | 44.5% |
| 2025 | 37.1% | 37.7% |
Worked example. PSB CASA, March 2025 = (demand deposits ₹9,52,585 crore + savings ₹43,18,072 crore) ÷ total deposits ₹1,41,96,270 crore = 52,70,657 ÷ 1,41,96,270 = 37.1%.
Both groups lost CASA as savers moved into term deposits after rates rose in 2022. PSBs' strength is their huge savings-account base (₹43 lakh crore, twice that of private banks), built on branch networks and government and Jan Dhan accounts. Their weakness is current accounts, which corporates keep with private banks.
On the lending side, private banks earn more: in 2024-25 their return on advances was 10.0% against the PSBs' 8.5%, and their net interest margin was 3.6% against 2.6%. The cost of deposits was almost the same (5.1% and 5.0%). Private banks lend more to higher-yielding retail and unsecured segments; PSBs lend more to large corporates, agriculture and government-linked borrowers. More on margins is in Part 24, bank business models and NIM.
Recapitalisation: what the rescue cost
When bad loans ate PSB capital, the government as owner had to refill it. The main stages:
- 2015 "Indradhanush" plan: budget support for PSB capital over four years.
- October 2017 package of ₹2.11 lakh crore: ₹1.35 lakh crore through recapitalisation bonds, about ₹18,000 crore of budget support and about ₹58,000 crore that banks were to raise from markets.
- Actual infusions: ₹90,000 crore in 2017-18 and ₹1,06,000 crore in 2018-19 (RBI), then ₹70,000 crore announced for 2019-20.
In total the government put about ₹3.1 lakh crore (₹3,10,997 crore by the Finance Ministry's count) into PSBs between 2016-17 and 2020-21. Since then PSBs have raised capital from markets and retained earnings instead; they raised ₹50,551 crore in 2025-26.
How a recap bond works
The government issued special non-tradeable bonds to a PSB, and the PSB paid for them with cash that was immediately used to buy new shares in itself. Money went round in a circle: the government got shares, the bank got capital (and held a bond as an asset), and no cash left the government at the start.
Worked example (illustrative numbers). A PSB gets ₹10,000 crore of recap bonds at a 7.5% coupon. Its capital rises by ₹10,000 crore at once. The government's only cash cost is the interest, 0.075 × ₹10,000 crore = ₹750 crore a year, which counts in the fiscal deficit. The principal adds to public debt but not to that year's deficit. That is why recap bonds were described as "liquidity neutral" for the government except for interest.
The privatisation agenda
The 2021 announcement
In the Budget speech of 1 February 2021, the Finance Minister said: "Other than IDBI Bank, we propose to take up the privatization of two Public Sector Banks and one General Insurance company in the year 2021-22." This would need amendments to the Acquisition Acts. Five years on, no PSB has been privatised; IDBI Bank, which is not a PSB, is the only bank actually being sold.
IDBI Bank
IDBI Bank was put under PCA on 5 May 2017 and needed repeated capital from the government and then LIC. The RBI lifted the PCA restrictions on 10 March 2021. The sale process:
| Date | Step |
|---|---|
| 7 October 2022 | Expression of interest invited; share price ₹42.40 |
| 8 January 2026 | Financial bids invited; bids below the reserve price of ₹94.42 rejected |
| 18 May 2026 | Best-offer bids invited (two qualified bidders) |
| 14 October 2026 | CCEA approves Fairfax entity at ₹81 a share (valuers' benchmark ₹75.99) |
Two tests remain: the RBI's fit-and-proper assessment, and compliance with the ownership rules, including the long-run 26% promoter cap and the rule that a promoter cannot control two banks (Fairfax already controls CSB Bank). See Part 18 for these rules.
Minimum public shareholding
SEBI's rules require every listed company to have at least 25% public shareholding, so the government may hold at most 75%. PSBs were exempted until 1 August 2026. At end-March 2025, five PSBs were above 75%: Indian Overseas Bank (94.6%), Punjab & Sind Bank (93.9%), UCO Bank (91.0%), Central Bank of India (89.3%) and Bank of Maharashtra (79.6%). PSBs have been closing the gap with qualified institutional placements (QIPs), which issue new shares, and the government with offers for sale (OFS), which sell its existing shares. DIPAM's figures show an OFS in Central Bank of India raising ₹2,266 crore in 2026-27.
Worked example: OFS vs QIP. The government holds 93.9% of a bank. To reach 75%:
- By OFS: it sells 93.9 − 75 = 18.9 percentage points of the existing shares. The bank gets no new capital; the government gets the cash.
- By QIP: the bank issues new shares equal to x% of existing shares to the public. The government's share becomes 93.9 ÷ (100 + x) × 100 = 75, so 100 + x = 125.2 and x = 25.2%. The bank gets the capital, and the government's stake is diluted without selling.
Social mandates: what only PSBs do in full
All banks must meet priority sector lending targets (40% of adjusted net bank credit) and open a quarter of new branches in unbanked rural centres (see Part 35, priority sector lending). But PSBs carry far more of the government's social programmes:
- Jan Dhan. Of 59.59 crore PMJDY accounts in October 2026, PSBs held 76.9%, RRBs (sponsored mostly by PSBs) 18.8% and private banks 4.0%.
- Rural branches. In 2024-25, 67.3% of PSBs' new branches were in rural and semi-urban centres, against 37.5% for private banks.
- Government schemes. PSBs dominate the delivery of Mudra loans, Kisan Credit Cards, PM SVANidhi, crop insurance and pension schemes, and handle most government business.
- Priority sector exposure. In 2024-25 the priority sector was 42.3% of PSBs' adjusted credit but 72.6% of their NPAs; for private banks the figures were 44.3% and 48.7%.
Private banks meet their own targets partly by buying priority sector lending certificates from banks with surpluses (they were the largest buyers in 2024-25), and partly through business correspondents and lending to NBFCs. This difference is one reason PSBs' returns are lower: some of their business is policy rather than profit. More on inclusion is in Part 32, microfinance and financial inclusion.
The debate: do PSBs need a different owner?
For privatisation: repeated recapitalisation cost taxpayers about ₹3.1 lakh crore; government ownership blurs accountability; PSB boards and CEOs have shorter tenures and less freedom; private banks earn higher returns on assets.
Against: PSBs were the stabilisers in crises (deposits flowed to them during the Yes Bank collapse and in 2020); they carry social mandates private banks avoid; and the FY26 numbers show that, once cleaned up, PSBs can be profitable on their own. The government's present approach is a middle path: keep the 12 PSBs, run them better through FSIB appointments and capital-market discipline, sell down to 75%, and sell banks that are not PSBs, such as IDBI.
Common exam traps
IDBI Bank is not a PSB. It has been a private sector bank for regulatory purposes since 21 January 2019, even though the government and LIC together own about 95% of it.
Nationalised banks and SBI are created by different laws. SBI: SBI Act, 1955. The other 11: Banking Companies (Acquisition and Transfer of Undertakings) Acts, 1970 and 1980.
FSIB replaced the BBB. The Financial Services Institutions Bureau has existed since 1 July 2022; the Banks Board Bureau was set up in 2016. The final appointment is made by the government (the ACC), not the FSIB.
PSB profit record vs private banks. PSBs' ₹1.98 lakh crore in FY26 is a record for PSBs. In FY25 private banks as a group still earned more (₹1.89 lakh crore vs ₹1.78 lakh crore).
FDI limits. 20% in PSBs, 74% in private banks. Do not mix them up.
Recap bonds are not tradeable. They were issued to the banks themselves and do not affect market liquidity.
Key facts at a glance
| Number of PSBs | 12 (since 1 April 2020); 27 in 2017 |
| Number of private banks | 21 (March 2026) |
| PSB laws | SBI Act, 1955; Acquisition Acts, 1970 and 1980 |
| Nationalisation | 14 banks on 19 July 1969; 6 on 15 April 1980 |
| Board appointments | FSIB (from 1 July 2022, replacing the 2016 BBB); approved by the ACC |
| Foreign investment limit | PSBs 20%; private banks 74% |
| Government stake, end-March 2025 | SBI 57.0% (lowest) to IOB 94.6% (highest) |
| MPS exemption for PSBs | Until 1 August 2026 (notification of 19 July 2024) |
| PSB share, end-March 2025 | 58.8% of deposits, 56.2% of advances |
| PSB GNPA peak | 14.6% (March 2018) |
| PSB GNPA / NNPA, March 2026 | 1.93% / 0.39% |
| PSB net profit | FY24 ₹1.41 lakh crore; FY25 ₹1.78 lakh crore; FY26 ₹1.98 lakh crore |
| Worst PSB loss | ₹85,370 crore in 2017-18 |
| PSB CRAR / cost-to-income, FY26 | 16.6% / 49.67% |
| Recapitalisation, 2016-17 to 2020-21 | About ₹3.1 lakh crore; October 2017 package ₹2.11 lakh crore incl. ₹1.35 lakh crore recap bonds |
| Privatisation announcement | Budget 2021-22: two PSBs and one general insurer |
| IDBI sale | 60.72% to Fairfax entity at ₹81/share, ₹52,878 crore; CCEA 14 October 2026 |
| Jan Dhan accounts | 59.59 crore (14 October 2026); 76.9% in PSBs |
Exam corner: what to remember
- 12 PSBs: SBI under the SBI Act, 1955; 11 nationalised banks under the Acquisition Acts of 1970 and 1980. Private banks are companies licensed under Section 22 of the BR Act.
- PSB top management is recommended by the FSIB (since 1 July 2022) and appointed by the government; the BBB (2016) came before it.
- Market share, end-March 2016 to 2025: PSB deposits 74.2% → 58.8%, advances 70.8% → 56.2%. In FY26 PSBs gained loan share but took only 50.8% of new deposits.
- PSB GNPA: 14.6% (March 2018 peak) → 2.6% (2025) → 1.93% (2026).
- PSB profits: loss of ₹85,370 crore (FY18) → ₹1.98 lakh crore (FY26), the fourth profitable year in a row and an 11.1% rise.
- FY26 PSB metrics: CRAR 16.6%, NNPA 0.39%, cost-to-income 49.67%, advances ₹127 lakh crore, deposits ₹156.3 lakh crore.
- Recap: about ₹3.1 lakh crore in 2016-17 to 2020-21; the ₹2.11 lakh crore package of October 2017 included ₹1.35 lakh crore of recap bonds.
- Privatisation: two PSBs announced in Budget 2021-22, none done; IDBI sale to Fairfax approved on 14 October 2026.
- FDI cap 20% (PSBs) vs 74% (PVBs). MPS of 25%; PSB exemption to 1 August 2026.
- Jan Dhan: 59.59 crore accounts, about 77% in PSBs, 4% in private banks.
For exam-specific syllabus and pattern details, see our pages for RBI Grade B, SBI PO and IBPS PO.
Test yourself
The Financial Services Institutions Bureau (FSIB), which recommends whole-time directors for public sector banks, was constituted with effect from:
Show answer
Answer: (c) The FSIB replaced the Banks Board Bureau (set up in 2016) from 1 July 2022.
According to the Finance Ministry, the aggregate net profit of public sector banks in 2025-26 was about:
Show answer
Answer: (c) ₹1.98 lakh crore, up 11.1% from ₹1.78 lakh crore in 2024-25; ₹1.41 lakh crore was FY24.
The eleven nationalised banks (other than SBI) derive their legal existence from:
Show answer
Answer: (b) The Acquisition Acts created them as "corresponding new banks"; SBI has its own 1955 Act.
The aggregate foreign investment limit in public sector banks is:
Show answer
Answer: (a) 20% for PSBs; private banks can go up to 74%.
In October 2026 the CCEA approved the sale of 60.72% of IDBI Bank to an entity of:
Show answer
Answer: (b) 10955230 Canada Inc., a Fairfax entity, at ₹81 a share for ₹52,878 crore.
A bank has operating expenses of ₹30,000 crore, net interest income of ₹42,000 crore and other income of ₹18,000 crore. Its cost-to-income ratio is:
Show answer
Answer: (b) 30,000 ÷ (42,000 + 18,000) = 30,000 ÷ 60,000 = 50%.
A bank group has a return on assets of 1.2% and its average assets are 12.5 times its average equity. Its return on equity is:
Show answer
Answer: (d) RoE = RoA × leverage = 1.2% × 12.5 = 15.0%.
In which year did public sector banks report their largest aggregate net loss, of about ₹85,370 crore?
Show answer
Answer: (c) 2017-18, when provisions of about ₹2.41 lakh crore swamped an operating profit of ₹1.56 lakh crore.
The government holds 90% of a listed bank and wants to reach 75% only by the bank issuing new shares to the public. New shares equal to what percentage of the existing shares must be issued?
Show answer
Answer: (c) 90 ÷ (100 + x) = 0.75 gives 100 + x = 120, so x = 20%.
Under the October 2017 recapitalisation package of ₹2.11 lakh crore for PSBs, the amount to be provided through recapitalisation bonds was:
Show answer
Answer: (d) ₹1.35 lakh crore through recap bonds; the rest was budget support and market raising.
Further reading
- RBI, Report on Trend and Progress of Banking in India 2024-25, Chapter IV: the statutory source for bank-group balance sheets, income, NPAs, ownership and governance; Table IV.1 and IV.3 are the basis for most comparisons here.
- RBI, Trend and Progress 2024-25, Appendix Table IV.10: Shareholding Pattern: government, institutional and foreign holdings in every PSB and private bank.
- RBI, Trend and Progress of Banking in India 2016-17, Chapter IV: the RBI's analysis of the 2017 recapitalisation package and recap bonds, with international comparisons.
- PIB, PSBs' performance in FY 2025-26 (12 May 2026): the official FY26 numbers on profit, NPAs, capital and efficiency.
- PIB, CCEA approval of IDBI Bank strategic sale (14 October 2026): a clear, detailed account of how a bank privatisation is run and priced.
- Union Budget 2021-22, Budget speech: the privatisation announcement (paragraph 84) in the government's own words.
- Financial Services Institutions Bureau: the FSIB's mandate and members.
- PMJDY dashboard: live Jan Dhan figures by bank group.
Sources
- RBI, Trend and Progress 2024-25, Chapter IV: Table IV.1 balance sheets for 2024 and 2025 (deposits, CASA, advances, assets, capital and reserves); Table IV.3 income, opex, wage bill, net profit (PSBs ₹1,78,364 crore, PVBs ₹1,89,211 crore), NIM; Table IV.4 cost of deposits and return on advances; Table IV.9 GNPA ratios and write-offs; PSB shares of 56.2% and 58.8%; six PSBs' government stakes falling; FDI limits of 20% and 74%; footnote on the MPS exemption to 1 August 2026 (notification of 19 July 2024); PSL shares of NPAs; PSLC buyers; new branches 67.3% vs 37.5%; variable pay 46% (accessed 24 October 2026)
- RBI press release, 29 December 2025: release of Trend and Progress 2024-25 under Section 36(2) of the BR Act (accessed 24 October 2026)
- RBI, Trend and Progress 2024-25, Appendix Table IV.10: government stakes in PSBs and ownership of private banks at end-March 2025 (accessed 24 October 2026)
- RBI, Trend and Progress 2022-23, Chapter IV: balance sheets for 2022 and 2023; GNPA ratios for 2022 and 2023; net profits for 2021-22 and 2022-23 (accessed 24 October 2026)
- RBI, Trend and Progress 2020-21, Chapter IV: balance sheets for 2020 and 2021; GNPA ratios for 2020 and 2021; income and wage data for 2020-21; the 2020 mergers (accessed 24 October 2026)
- RBI, Trend and Progress 2018-19, Chapter IV: balance sheets for 2018 and 2019; GNPA ratios (PSB peak 14.6%); RoA and RoE for 2017-18 and 2018-19; recapitalisation of ₹90,000 crore and ₹1,06,000 crore; IDBI reclassified from 21 January 2019 (accessed 24 October 2026)
- RBI, Trend and Progress 2016-17, Chapters IV and V: balance sheets for 2016 and 2017; GNPA ratios for 2016 and 2017; the ₹2.11 trillion package with ₹1.35 trillion in recap bonds (Chapter IV, id=18060) (accessed 24 October 2026)
- RBI, Trend and Progress 2015-16, Chapter II: RoA and RoE by bank group for 2014-15 (accessed 24 October 2026)
- PIB, 12 May 2026: FY26 PSB net profit ₹1.98 lakh crore (+11.1%), operating profit ₹3.21 lakh crore, GNPA 1.93%, NNPA 0.39%, PCR above 90%, slippage 0.7%, CRAR 16.6%, capital raised ₹50,551 crore, cost-to-income 49.67%, deposits ₹156.3 lakh crore, advances ₹127 lakh crore (accessed 24 October 2026)
- PIB, 14 October 2026: IDBI Bank sale terms, process, PCA dates, reserve and benchmark prices, residual stakes (accessed 24 October 2026)
- RBI press release, 29 May 2026 (BSR-1): credit growth of 14.1%; private bank credit growth 12.3%; PSB growth above headline (accessed 24 October 2026)
- RBI press release, 29 May 2026 (BSR-2): PSBs 50.8% and private banks 38.6% of incremental deposits in FY26 (accessed 24 October 2026)
- Goodreturns, 16 March 2022: Rajya Sabha reply of 15 March 2022 giving PSB net profit or loss from 2015-16 to 2020-21 (accessed 24 October 2026)
- Business Standard, May 2024: PSB profit of ₹1,41,203 crore in FY24 and ₹1,04,649 crore in FY23; total recapitalisation of ₹3,10,997 crore from 2016-17 to 2020-21 (accessed 24 October 2026)
- Business Today, 2019: Lok Sabha reply on PSB operating profit of ₹1,55,603 crore and provisions of ₹2,40,973 crore in 2017-18 (accessed 24 October 2026)
- Union Budget 2021-22, Budget speech: privatisation of two PSBs and one general insurer; legislative amendments needed (accessed 24 October 2026)
- FSIB, About us and Bureau members: FSIB constituted from 1 July 2022; mandate; ex officio members including DFS Secretary Sanjay Lohiya from 1 June 2026 (accessed 24 October 2026)
- PMJDY, account statistics: 59.59 crore beneficiaries and ₹3,24,069 crore of deposits as on 14 October 2026, by bank group (accessed 24 October 2026)
- DIPAM home page: 2026-27 disinvestment receipts, including an OFS in Central Bank of India for ₹2,266.13 crore (accessed 24 October 2026)