SBI, Bank of Baroda and 3 other PSU bank stocks emerge as the cleanest lenders in Q2 FY26

Synopsis:
SBI, Bank of Baroda, and the other three largest public sector banks have reported their Q2 results. Which bank delivered the best in terms of asset quality?

Asset​‍​‌‍​‍‌​‍​‌‍​‍‌ quality ranks among the key measures that reveal the financial condition of a bank. It essentially demonstrates the security of the bank’s loans and the repayment capacity of the borrowers. A decline in asset quality means banks will have to face problems with increasing NPAs, elevated provisioning expenses, and a decrease in profitability.

One of the best examples was the Yes Bank crisis, when the increase in bad loans led to loss of investor confidence and regulatory intervention. Hence, healthy asset quality not only acts as a cushion for profits but also guarantees the bank’s viability and trust over ​‍​‌‍​‍‌​‍​‌‍​‍‌time.

In this article, we will dive into the asset quality of the top five banks included in the Nifty PSU Bank index. These five banks account for over 81 percent of the total weight in the index.

State Bank of India

State​‍​‌‍​‍‌​‍​‌‍​‍‌ Bank of India Ltd is the top-ranked public-sector bank in India in terms of market capitalisation. The market cap of the bank stands at Rs 8.93 lakh crore. It is a bank of the country that has a strong influence in the areas of retail, corporate, rural, and digital banking. The stock of SBI has a significant percentage of 32.58 percent in the Nifty Public Sector Bank ​‍​‌‍​‍‌​‍​‌‍​‍‌index.

State Bank reported a GNPA of 1.73 percent in Q2 FY26, which declined by 40 bps from 2.13 percent in Q2 FY25. Also, it reported an NNPA of 0.42 percent in Q2 FY26, which declined by 11 bps from 0.53 percent in Q2 FY25. It has a Provision Coverage Ratio (PCR) of 92.29 percent in Q2 FY26, as against 92.21 percent in the same quarter of the previous year.

Bank of Baroda

Bank​‍​‌‍​‍‌​‍​‌‍​‍‌ of Baroda Ltd (BOB) is the second-biggest P.S.U. bank in India with a market value of around Rs.1.53 lakh crore. BOB is a well-known brand for its robust domestic network as well as for its presence in the international markets. It has a well-balanced retail-corporate portfolio and its digital capabilities are also increasing. It has a 14.57 percent weightage in the Nifty Public Sector Bank ​‍​‌‍​‍‌​‍​‌‍​‍‌index.

BOB reported a GNPA of 2.16 percent in Q2 FY26, which declined by 34 bps from 2.50 percent in Q2 FY25. Additionally, it reported an NNPA of 0.57 percent in Q2 FY26, which also declined slightly by 3 bps from 0.60 percent in Q2 FY25. It has a Provision Coverage Ratio (PCR) of 93.21 percent in Q2 FY26, as against 93.61 percent in the same quarter of the previous year.

Canara Bank

Canara​‍​‌‍​‍‌​‍​‌‍​‍‌ Bank is the 4th biggest public-sector bank in India, by market capitalisation, with a market cap of about Rs 1.4 lakh crore. The bank is known for its conservative underwriting and concentrates on maintaining good asset quality, making the bank customer-friendly through digital banking, and increasing retail lending. The Canara Bank share represents a weightage of 13.92 percent in the Nifty Public Sector Bank ​‍​‌‍​‍‌​‍​‌‍​‍‌index.

Canara Bank reported a GNPA of 2.35 percent in Q2 FY26, which declined by 138 bps from 3.73 percent in Q2 FY25. Additionally, it reported an NNPA of 0.54 percent in Q2 FY26, which also dropped by 45 bps from 0.99 percent in Q2 FY25. It has a Provision Coverage Ratio (PCR) of 93.59 percent in Q2 FY26, as against 90.89 percent in the same quarter of the previous year.

Punjab National Bank

Punjab​‍​‌‍​‍‌​‍​‌‍​‍‌ National Bank (PNB), a historically significant PSU bank of India, has a market capitalization of approximately Rs 1.45 lakh crore. It is a leader in the market in segments like retail, SME, and corporate lending and at the same time is fast-tracking its digital transformation. The weightage of PNB is 11.69 percent in the Nifty Public Sector Bank ​‍​‌‍​‍‌​‍​‌‍​‍‌index.

Punjab National Bank reported a GNPA of 3.45 percent in Q2 FY26, which declined by 103 bps from 4.48 percent in Q2 FY25. Additionally, it reported an NNPA of 0.36 percent in Q2 FY26, which declined by 10 bps from 0.46 percent in Q2 FY25. It has a Provision Coverage Ratio (PCR) of 96.91 percent, as against 96.67 percent in the same quarter of the previous year.

Indian Bank

Indian​‍​‌‍​‍‌​‍​‌‍​‍‌ Bank is a major public-sector bank of India with a market capitalization of close to Rs 1.16 lakh crore. It is located in Chennai and has a firmhold in the South of the country. Through the digital channel, the retail and MSME sectors are growing, and Indian Bank is spreading all over the country. The bank’s weightage in the Nifty Public Sector Bank index is ​‍​‌‍​‍‌​‍​‌‍​‍‌8.37 percent.

Indian Bank reported a GNPA of 2.60 percent in Q2 FY26, which declined by 88 bps from 3.48 percent in Q2 FY25. Additionally, it reported an NNPA of 0.16 percent in Q2 FY26, which declined by 11 bps from 0.27 percent in Q2 FY25. It has a Provision Coverage Ratio (PCR) of 98.28 percent, as against 97.60 percent in the same quarter of the previous year.

In​‍​‌‍​‍‌​‍​‌‍​‍‌ the second quarter of the financial year 26, SBI had the lowest GNPA of 1.73% among the top five PSU banks, and also an NNPA of 0.42%, which means that the bank’s asset quality was stronger than that of other banks in the sector. Indian Bank was the one to record the lowest NNPA at 0.16% and the highest PCR; however, its GNPA at 2.60% was still higher. 

Besides, the asset quality of Canara Bank and PNB was also good enough to show their turnaround, and BOB was progressing stably with its ratios.Overall, all banks have revealed year-on-year progress in asset quality, with SBI disclosing the lowest GNPA in this group during the ​‍​‌‍​‍‌​‍​‌‍​‍‌quarter.

Written by Satyajeet Mukherjee

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