For the first time, the banking sector's consolidated net profit in the fourth quarter exceeded Rs 1 lakh crore. In Q4FY25, the public sector and private banks combined for a net profit of Rs 1,00,178 crore, up 9% from Rs 91,829 crore the previous year.

More than a third of the totalRs 2.93 lakh crore profits registered by listed companies were made by banks. Profit for listed companies rose despite deflated net interest margins due to reduced lending rates after the February RBI cut being marred by persistently high deposit rates. But they rose to the challenge with profits from treasury investments and collections from distressed loans recoveries.

Low interest rates and the increased liquidity pressure from the RBI pushed bond yields down to create mark-to-market earnings. Increased value of government bonds with higher coupon rates is experienced when interest rates of bonds are lower. Banks benefited when they sold pieces of their government bond investments either to other banks, or through RBI’s open market repurchases.

Because about a quarter of deposits are in the form of government securities, public-sector bank were most hit because of deterioration in bond yields. Their net profit for the quarter ended March 2025 grew 13 % to Rs 49301 crore from Rs 43615 crore, including IDBI Bank, a privately-listed institution but majority-owned by LIC and the government.

A minor 5.2% rise in net profit of private sector banks was recorded as they touched Rs 50,877 crore from Rs 48,214 crore. Preliminary numbers, without IndusInd Bank (which is destined to witness a significant decrease in its earnings under the weight of provisions of Rs 2000 crore or more for derivative expenses) depict an outcome of those other than the former as well. Other financial commentators assert that more provisioning for the micro finance book can result to reduced profits for the company.

Four PSU banks, SBI (40%), Bank of Baroda (10.8%), Canara Bank (10.3%), Union Bank (10.1%), and PNB (9.4%), accounted for more than 80% of total profits. SBI was the only public sector bank to report a decline, with net profit falling 8% to Rs 19,941 crore.

In the private sector, profits were even more concentrated. HDFC Bank contributed 37.9%, ICICI Bank 28.1%, and Axis Bank 14.7% to the total.

Analysts claim that there is a direct correlation between GDP growth and the growth in earnings in the banking industry. When interest rates decline, banks face pressure on their margins, but this is usually countered by higher demand, better trading profits, and fewer provisions.