State Bank of India, the country's top lender, posted a 14% rise in quarterly net profit on Saturday, beating forecast, bolstered by credit demand growth and fee income.
The bank and rivals ICICI Bank and HDFC Bank are seeing a surge in demand for loans in a rapidly growing economy, but rising interest rates are a concern for the sector.
State Bank posted a net profit of 28.28 billion rupees ($620 million) in the fiscal third quarter ended December, versus 24.79 billion rupees a year earlier.
A Reuters poll of 16 brokerages had forecast profit to grow 10% to 27.15 billion rupees.
Shares of State Bank of India, valued at $35 billion, rose nearly 24% in 2010, compared with a 17% rise in the main market and 33% gain in the banking sector index.