Government Review of PSU Banks and the New AI & Digital Banking Push

The latest review shows profits rising, but also reveals a strong push towards AI and digital systems.

People often wonder how safe their money feels when banks change their systems so fast. This thought came up again when the government review for H1 FY26 reported net profit of ₹93,675 crore, a number that surprised many and also raised fresh talks about digital checks in public banks.

Why the Government Review of PSU Banks is Essential Now?

The performance review of public sector banks took place during the 2025 meeting of the Department of Financial Services. The report checked loans, customer systems and security layers. It also pushed a stronger tone on digital transformation in public sector lending. 

And the meeting spoke about how these lenders must expand online work without confusing people who still visit branches. Sometimes small habits tell the story more than big numbers.

Read More – 4 PSU Banks Likely to Disappear After Consolidation

Before going further, here is a small table that records the main points from the government website.
 

These figures give the base for understanding the policy shift that follows.

What AI and Digital Banking in Public Banks Really Means?

Many people hear words like AI driven improvements in banking services but feel unsure what it means. In basic terms, the system studies patterns, checks risk and helps banks decide quicker. Digital banking is easier to picture. It is simple online work that earlier needed long forms. The government focus on AI in financial systems grew stronger this year. Feels like the natural shift as people move to screens for almost everything.

Here is another table that lists the directions given to banks.
 

These pointers show where upcoming changes will take place.

A past LoansJagat’s article spoke about how public banks were expected to cross digital footprint loans of ₹1 lakh crore by FY26. The same topic appeared again in the 2025 report, which shows the trend did not slow down. And it gives context to the performance review of public sector banks and the government evaluation of banking institutions mentioned earlier.

How Government Action on PSU Banks Has Evolved Over Time

Earlier reviews focused on cleaning old loan records and correcting bad assets. This time the mood looked different. 

Banks were asked to build safer screens, better apps and new forms of online checks. People may feel this shift during daily banking. And it shows a move that has been building for a few years.

Also Read – Will Six Mega Banks Replace India’s Twelve PSU Lenders Soon?

Conclusion 

The 2025 review shows a clear transition. Public sector banks are trying to move from traditional habits to smart systems without alienating long-time customers.

The push towards AI and digital banking in public banks is visible everywhere, from new lending models to customer-facing applications. And the Government review of PSU banks makes one thing clear: the coming years will focus more on digital strength than branch expansion.

Quiet change, steady progress, and a new banking experience taking shape.