The Centre has announced plans to set up a high-level committee on banking as part of a broader reform push aimed at supporting India’s journey towards becoming a ‘Viksit Bharat’, Finance Minister Nirmala Sitharaman said while presenting the Union Budget 2026–27 in Parliament on Sunday. The move is intended to review the entire banking architecture and recommend changes suited for the next phase of economic growth, even as the government underlined the improved health of the financial sector.
Describing India’s banking system as being in a strong position, Sitharaman said balance sheets have strengthened, profitability has improved and control over non-performing assets has significantly tightened. Asset quality has seen marked improvement, with coverage levels crossing 98 per cent, indicating greater resilience and stability in the system. Against this backdrop, the proposed committee will focus not only on growth-oriented reforms but also on financial stability, inclusion and consumer protection.
The announcement signals a continuation of structural reforms in the financial sector, which the government sees as critical for sustaining high growth rates and supporting expanding trade, investment and credit needs. The committee’s mandate is expected to include reviewing regulatory structures, operational efficiencies and the evolving role of banks in a rapidly digitising and globally integrated economy.
Alongside banking reforms, the Budget outlined measures to strengthen non-banking financial companies (NBFCs), particularly those in the public sector. The government plans to improve efficiency by restructuring public sector NBFCs into larger and stronger entities on the lines of institutions such as Power Finance Corporation (PFC) and Rural Electrification Corporation (REC). The consolidation approach is aimed at creating scale, better risk management and enhanced capacity to finance infrastructure and development projects.
In a move targeted at global capital flows, Sitharaman said rules governing non-debt investments under foreign exchange laws will be reviewed. The objective is to modernise the regulatory framework and make it more user-friendly for foreign investors, in alignment with India’s evolving economic priorities. The step is seen as part of a broader effort to position India as an attractive and stable investment destination amid global economic uncertainties.
The government also proposed measures to deepen domestic capital markets, with a specific thrust on the corporate bond segment. A market-making framework will be introduced for corporate bonds, providing access to funds and derivatives linked to corporate bond indices. Total return swaps on corporate bonds will also be enabled, a move that could enhance liquidity, improve price discovery and broaden investor participation in the bond market.
Attention was also given to the municipal bond market, which has long been viewed as an underutilised channel for urban infrastructure financing. To encourage large cities to tap this route, the government will provide an incentive of Rs 100 crore for a single municipal bond issuance exceeding Rs 1,000 crore. The measure builds on the existing ‘Amrit’ framework and aims to strengthen urban local bodies’ access to market-based funding, while improving transparency and financial discipline.
Taken together, the banking committee, NBFC restructuring and capital market reforms point to a multi-layered strategy: strengthening core financial institutions, diversifying funding channels and making regulatory systems more responsive to both domestic and international investors. The emphasis on stability and consumer protection alongside growth indicates a calibrated approach rather than aggressive liberalisation.
Sitharaman also noted that inputs for the Budget were gathered from citizens across the country, including youth, through various platforms, reflecting an attempt to align policy priorities with broader public aspirations.
As India prepares for its next stage of development, the financial sector reforms announced in the Budget signal a focus on building stronger institutions, deeper markets and a more modern regulatory framework, all seen as essential pillars for supporting sustained economic expansion and the long-term vision of a developed India.
