In her Union Budget speech for 2026–27, Finance Minister Nirmala Sitharaman outlined a series of forward-looking proposals for the financial sector, aimed at strengthening India’s banking system and enhancing ease of doing business as the country moves towards the goal of Viksit Bharat.
A key announcement was the proposal to establish a high-level committee on Banking for Viksit Bharat. The panel will undertake a comprehensive review of the entire banking ecosystem, including banks and non-banking financial companies (NBFCs).
The objective of the committee will be to align the financial sector with India’s next phase of economic growth, while ensuring financial stability, greater inclusion and robust consumer protection.
Highlighting the sector’s current strengths, Sitharaman noted that banks today have strong balance sheets, record profitability and near-universal access to banking services, with 98 per cent of villages now covered. The proposed committee will recommend reforms to improve efficiency, scale and preparedness to meet future challenges.
To strengthen public sector financial institutions in the power sector, the Finance Minister proposed the restructuring of the Power Finance Corporation (PFC) and the Rural Electrification Corporation (REC). The move is aimed at achieving greater scale and operational efficiency in these key non-banking entities, thereby supporting infrastructure financing and the government’s broader push for energy sector development.
She also announced a comprehensive review of the Foreign Exchange Management Act (FEMA) rules governing non-debt instruments. The objective is to create a more contemporary and user-friendly framework for foreign investments, aligned with evolving economic priorities. The reform is expected to simplify procedures and attract greater global capital inflows into Indian markets.
On deepening India’s bond markets, Sitharaman proposed measures to promote corporate and municipal bonds. These include incentives to encourage larger bond issuances by municipal corporations, providing alternative funding avenues for urban infrastructure development.
In a significant step to further ease of doing business and enhance foreign participation, individuals residing outside India will now be permitted to invest in equity instruments of listed Indian companies through the portfolio investment scheme. Additionally, the investment limit for each such individual is proposed to be increased from five per cent to ten per cent, while the aggregate limit for all such investors will rise from ten per cent to 24 per cent.
The move is expected to boost liquidity in equity markets and attract a wider pool of international investors. Market sentiment remained positive following the announcements, with shares of related entities registering gains amid optimism over the proposed reforms.
Overall, the proposals signal a proactive approach to strengthening India’s financial architecture at a time of global economic uncertainty.
— IANS
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