India's Banks Face 'Viksit Bharat' Reform Push

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AuthorAnanya Iyer|Published at:
India's Banks Face 'Viksit Bharat' Reform Push
Overview

Union Finance Minister Nirmala Sitharaman has announced the formation of a "High Level Committee on Banking for Viksit Bharat" and proposed restructuring Public Sector NBFCs like PFC and REC as part of Budget 2026. These initiatives aim to comprehensively review and align India's financial sector with future growth trajectories, bolstering financial stability, inclusion, and consumer protection. The sector is currently characterized by robust balance sheets and record profitability, positioning it to embrace future reforms.

**### Strategic Banking Overhaul Initiated

The Indian financial sector stands at a critical juncture, marked by robust health and a forward-looking government agenda. Finance Minister Nirmala Sitharaman's Budget 2026 proposals signal a proactive approach to shaping the sector's future. The centerpiece of this strategy is the establishment of a "High Level Committee on Banking for Viksit Bharat." This committee is tasked with a comprehensive review, ensuring alignment with India's next phase of economic expansion while maintaining stringent safeguards for financial stability, consumer protection, and widespread inclusion.

The finance minister highlighted the sector's current strength, noting strong balance sheets and historic profit levels. Asset quality has improved, with banking services reaching over 98% of the nation's villages. This foundation, Sitharaman stated, provides a solid platform for future reform-led growth. The proposed committee's mandate will analyze measures necessary to sustain this momentum, suggesting a focus on long-term structural enhancements rather than short-term fixes.

**### Enhancing NBFC Efficiency and Reach

As a significant step towards enhancing the scale and operational efficiency of Public Sector Non-Banking Financial Companies (NBFCs), the government has identified restructuring entities like the Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) as an initial move. This initiative aligns with a broader vision for NBFCs under the 'Viksit Bharat' framework, which includes specific targets for credit disbursement and the integration of advanced technology. The move is expected to streamline operations and improve the financial institutions' capacity to support economic development.

Beyond direct financial sector reforms, the budget introduced indirect tax measures designed to simplify tariff structures. These adjustments aim to invigorate domestic manufacturing, boost export competitiveness, and rectify existing duty inversions, complementing the overall economic development strategy.

**### Economic Backdrop and Growth Prospects

These financial sector initiatives are set against a backdrop of projected economic resilience. The Economic Survey for the financial year 2025-26 forecasts India's real GDP growth for 2026-27 to be between 6.8% and 7.2%. This projection indicates sustained medium-term growth capacity, even amidst a challenging global economic environment. The government's fiscal plans and sectoral reforms are thus intended to capitalize on and contribute to this anticipated economic expansion.

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