State Bank of India , the nation's top lender by assets, reported a 62 per cent fall in quarterly profit although its bad loans rose less than expected.
SBI shares gained more than 5 per cent after the results.
The lender, which accounts for almost a quarter of India's banking business, said net profit was Rs 1,115 crore ($164 million) for its fiscal third quarter ended December 31, compared with Rs 2,910 crore a year earlier.
Analysts on average had expected a net profit of Rs 3,308 crore.
Gross bad loans as a percentage of total loans rose to 5.1 per cent in the December quarter from 4.15 per cent in the previous three months.
The Reserve Bank of India, the banking sector regulator, has asked lenders to treat some troubled accounts as if they were bad loans and make adequate provisions, as part of its efforts to clean up bank balance sheets by March 2017.
