Banking Sector Budget 2026: Nirmala Sitharaman announces high-level panel, NBFC overhaul and market reforms

Union finance minister Nirmala Sitharaman on Sunday announced a series of measures aimed at strengthening India’s banking and financial ecosystem, as she underlined the sector’s improved health and outlined the next phase of reforms under the Viksit Bharat vision.

Presenting her record ninth consecutive Union Budget in Parliament, Sitharaman proposed 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.

“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 said during her 90-minute Budget speech.





The committee will examine the sector’s structure and readiness as India seeks to scale up growth while protecting consumers and maintaining systemic stability.

Highlighting the turnaround in the sector, the finance minister said the Indian banking system today is characterised by strong balance sheets, historic highs in profitability, improved asset quality and coverage exceeding 98 per cent of villages across the country.

“At this juncture, we are well placed to futuristically evaluate the measures needed to continue on the path of reform-led growth of this sector,” she added.

Sitharaman also laid out a clear vision for non-banking financial companies (NBFCs) under the Viksit Bharat framework, with defined targets for credit disbursement and technology adoption.




“The vision for NBFCs for Viksit Bharat has been outlined with clear targets for credit disbursement and technology adoption,” she said.

To improve scale and operational efficiency in public sector NBFCs, the finance minister proposed restructuring key institutions. “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 said, describing it as part of a broader effort to strengthen public sector financial institutions.

On the regulatory front, Sitharaman proposed a comprehensive review of the Foreign Exchange Management (Non-Debt Instruments) Rules to create a more contemporary and user-friendly framework for foreign investments, consistent with India’s evolving economic priorities.

Separately, Sitharaman also announced a set of indirect tax measures in the Union Budget 2026-27 aimed at simplifying the tariff structure, supporting domestic manufacturing, promoting export competitiveness and correcting duty inversion.

The proposed committee comes amid expectations of a broader transformation roadmap for public sector banks, under the Viksit Bharat 2047 framework.

Sitharaman’s remarks on balance-sheet strength and profitability align with recent data showing improved asset quality and sustained earnings across state-run lenders. PSBs had reported a combined net profit of Rs 93,675 crore in the first half of the current fiscal, while gross non-performing assets declined to multi-year lows.

The Budget follows the tabling of the Economic Survey 2025-26 in Parliament earlier in the week, which projected India’s real GDP growth at 6.8–7.2 per cent for 2026-27, reflecting sustained medium-term growth capacity despite global challenges.