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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