Finance Minister Unveils Banking Sector Reforms in Budget 2026 Speech
Union Finance Minister Nirmala Sitharaman, in her Budget speech on Sunday, announced the establishment of a high-level committee dedicated to "Banking for Viksit Bharat". This move signals a comprehensive review of India's financial sector as the nation prepares for its next phase of economic growth and development.
Committee to Align Banking with National Growth Goals
During her address, Sitharaman emphasized the committee's mandate to thoroughly examine the banking landscape. "I propose setting up a high-level committee on banking for Viksit Bharat to comprehensively review the sector and align it with India's next phase of growth, while safeguarding financial stability, inclusion and consumer protection," she stated. The initiative aims to ensure that the banking system supports broader economic objectives under the Viksit Bharat framework.
NBFC Vision and Restructuring Plans
In addition to the banking committee, the Finance Minister outlined a clear vision for non-banking financial companies (NBFCs). She highlighted defined targets for credit disbursement and technology adoption within the Viksit Bharat strategy. "The vision for NBFCs for Viksit Bharat has been outlined with clear targets for credit disbursement and technology adoption," Sitharaman remarked.
To enhance scale and efficiency in public sector NBFCs, a restructuring plan was unveiled. "In order to achieve scale and improve efficiency in the public sector NBFCs, as a first step, it is proposed to restructure the Power Finance Corporation and Rural Electrification Corporation," she explained. This step is part of broader efforts to streamline operations and boost performance in key financial institutions.
Strong Banking Sector Performance Highlighted
Sitharaman also noted the current robust state of the Indian banking sector, characterized by strong balance sheets and historic high profitability. This underscores the significant turnaround achieved over recent years following an extensive clean-up phase. Her comments align with recent data showing improved asset quality and sustained earnings across state-run lenders.
Public sector banks reported a combined net profit of Rs 93,675 crore in the first half of the current fiscal year, with gross non-performing assets declining to multi-year lows. This financial health provides a solid foundation for the proposed reforms and future growth initiatives.
Broader Transformation Under Viksit Bharat 2047
The establishment of the committee comes amid expectations of a broader transformation roadmap for public sector banks, framed within the Viksit Bharat 2047 vision. The government aims for Indian banks, particularly public sector banks, to emerge as globally competitive institutions. This transformation will focus on key areas such as:
- Enhanced governance structures
- Improved operational efficiency
- Widespread adoption of advanced technologies
By addressing these aspects, the government seeks to position the banking sector as a catalyst for sustainable economic development, ensuring it meets the evolving needs of a growing economy while maintaining stability and inclusivity.
