Union Budget 2026: Sitharaman proposes high-level panel on ‘Banking for Viksit Bharat’ to boost NBFC efficiency

Union Budget 2026: Finance Minister Nirmala Sitharaman on Sunday proposed the setting up of a high-level committee on “Banking for Viksit Bharat” to recommend reforms aimed at improving efficiency across the banking system, including non-banking financial companies (NBFCs).

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The proposed panel will examine structural reforms across the banking system, with a specific mandate to enhance efficiency, scale and technological adoption in non-banking financial companies (NBFCs), as India prepares for its next phase of economic expansion.

Presenting the Union Budget 2026 in Parliament on Sunday (1 February), FM Sitharaman underlined the resilience of the financial sector, arguing that a decade of sustained reforms has placed Indian banking on a far stronger footing than in the past.

FM Sitharaman positioned the proposed review as a forward-looking exercise to align financial intermediation with the country’s long-term development ambitions under the Viksit Bharat 2047 framework.

High-level review to align banking with India’s growth trajectory

Announcing the proposal, finance minister Nirmala Sitharaman said: “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.”

According to FM Sitharaman, the committee will assess the structure and functioning of the banking system and recommend measures that ensure it is equipped to support a larger, more complex and technology-driven economy.

The initiative comes amid expectations of a broader transformation roadmap for public sector banks (PSBs), with the government seeking to build globally competitive institutions anchored in sound governance and operational efficiency.

NBFCs at the centre of the Viksit Bharat framework

A key focus of the proposed review will be non-banking financial companies, which have emerged as critical conduits of credit, particularly in segments underserved by traditional banks. Sitharaman outlined a clear vision for the sector, linking NBFC reform to defined performance and technology benchmarks.

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

To address concerns around scale and efficiency, especially in the public sector, she also announced initial restructuring steps.

“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,” Sitharaman said.

Strong balance sheets and historic profitability

Reiterating the Narendra Modi-led government’s confidence in the sector, FM Sitharaman noted that Indian banking today is characterised by robust balance sheets and historically high profitability. She attributed this turnaround to the prolonged clean-up of stressed assets and reforms implemented over the past several years.

In her Union Budget 2026 speech, the finance minister said the sector’s current strength reflects the impact of sustained policy efforts, with improved asset quality and stable earnings now visible across state-run lenders.

Recent data show that public sector banks reported a combined net profit of ₹93,675 crore in the first half of the current financial year, while gross non-performing assets declined to multi-year lows.

Banking reforms linked to inclusive development

Beyond institutional reform, FM Sitharaman linked financial sector strengthening to broader socio-economic outcomes. Highlighting the government’s emphasis on inclusive growth, she said close to 25 crore individuals had been lifted out of multidimensional poverty over the past decade.

The proposed committee, she added, is intended to ensure that the banking system not only supports growth but does so in a manner that reinforces inclusion, consumer protection and long-term financial stability.

Industry Cheers Decision

Arvind Kapil, MD and CEO, Poonawalla Fincorp said, “The Union Budget reflects a clear and pragmatic understanding of India’s growth priorities as the country advances towards Viksit Bharat. It underscores the growing importance of NBFCs in India’s financial ecosystem, with measures aimed at strengthening their role in credit delivery and market development."

"Complementary financial market reforms - including strengthening corporate bond markets, introducing bond derivatives and incentivising large municipal bond issuances - will broaden funding avenues for NBFCs and institutional borrowers. These measures clearly position NBFCs to play a central role in the next phase of India’s credit-led growth.” Arvind Kapil added.