India's top lender by assets, State Bank of India, reported on Saturday a bigger-than-expected 46 percent slide in quarterly profit from a year earlier as provisions against bad loans jumped.
Net profit for the financial first quarter to June slumped to 15.84 billion rupees ($348.9 million) from 29.14 billion rupees a year earlier, the state-run lender said in a statement.
The earnings undershot market expectations of a profit of 18 billion rupees and came as provisions against bad loans climbed 61 percent to 27.82 billion rupees.
Indian banks' balance sheets have been under strain as the country's economy slows and rising interest rates have made it tougher to repay loans.
The central bank has raised interest rates 11 times since March 2010 as it seeks to tame near double-digit inflation.
Many companies have pledged shares against bank loans but a sharp decline in the stock market has eaten away at the value of their collateral.
State-run lenders have been voicing concern about the ability of borrowers to repay loans as bad debts mount.
Public sector banks account for 70 percent of the country's total loans.
Shares of some state-controlled banks have fallen more than 20 percent this year amid worries about the strength of their balance sheets.