Public Sector Banks Edge Private Sector Banks in Q2FY27 Profit Growth: SBI Research

Public sector banks (PSBs) delivered slightly stronger profit growth of 20 per cent year-on-year at ₹59,366 crore in the second quarter (Q2FY27), marginally ahead of major private sector banks, whose profit increased 19.8 per cent year-on-year to ₹53,629 crore. According to an analysis by SBI’s economic research department (ERD), business growth remained healthy across both banking categories.

PSBs recorded 13.1 per cent deposit growth and 18.8 per cent credit growth during the quarter. In comparison, major private banks posted stronger deposit growth of 21.0 per cent, while their credit growth stood at 19.6 per cent.

The ERD officials highlighted that outstanding loans against gold jewellery have risen sharply across both banks and non-banking financial companies (NBFCs), with growth expanding considerably faster among banks. Gold-jewellery lending continued to serve as a major driver of retail credit, accounting for a 7.8 per cent share in banks and a 13.9 per cent share in NBFCs in September 2026. This compares to 7.6 per cent and 2.1 per cent respectively in May 2024. Officials noted that this expansion comes amid elevated gold prices, which have increased the collateral value and enabled borrowers to raise larger amounts against their jewellery.

Asset quality metrics indicated strong performance, particularly regarding net non-performing assets (NPAs) among PSBs. Aggregate Gross NPA and Net NPA stood at 1.80 per cent and 1.21 per cent respectively for PSBs. For major private banks, Gross NPA and Net NPA were recorded at 1.61 per cent and 1.39 per cent.

Credit has continued to expand following the post-GST rate rationalization in 2025. Scheduled commercial banks' credit growth accelerated to 18.2 per cent and deposits grew at 16.7 per cent for the fortnight ended October 15, 2026. On an incremental basis, credit growth reached ₹10.6 lakh crore in Q2FY27, compared to ₹5.9 lakh crore in Q2FY25, while deposits grew by ₹2.3 lakh crore compared to ₹3.6 lakh crore in the corresponding period.

Sectoral incremental credit growth data for Q2FY27 indicates that industry and personal loans contributed 50 per cent of the incremental credit growth, with industry accounting for 22.4 per cent and personal loans making up 27.6 per cent. Current trends estimate that both aggregate deposit and credit will grow by 15 to 16 per cent during FY27.

"The latest banking sector data highlights a healthy competitive dynamic between public sector and private sector banks, with both posting robust credit and deposit expansion. The notable rise in gold-jewellery lending reflects how elevated commodity prices directly influence retail credit behavior across financial institutions. As scheduled commercial banks continue to record strong incremental credit flows into industry and personal loans, the overall momentum indicates a stable financial environment capable of supporting broader economic growth through the remainder of the fiscal year." — Dr. Shishir Gupta, Founder & CEO, StartupLanes