- While unveiling the 2026-27 Budget, Nirmala Sitharaman highlighted the robust aspects of the country’s banking sector, including solid balance sheets, record profitability, enhanced asset quality, and impressive coverage that reaches over 98 percent of villages across India.
- On Sunday, Finance Minister Nirmala Sitharaman proposed the formation of a high-level committee aimed at thoroughly reviewing the banking sector to ensure it aligns with the next phase of growth for the country.
- During her budget presentation, Sitharaman emphasized the strengths of the banking sector, noting its strong balance sheets, historic profitability levels, improved asset quality, and the fact that more than 98 percent of villages are covered.
- “At this point, we are in a great position to thoughtfully assess the measures needed to keep driving reform-led growth in this sector.
- I propose establishing a high-level committee on banking for Viksit Bharat to conduct a comprehensive review of the sector, ensuring it aligns with India’s next growth phase while also prioritizing financial stability, inclusion, and consumer protection,” she stated.
While unveiling the 2026-27 Budget, Nirmala Sitharaman highlighted the robust aspects of the country’s banking sector, including solid balance sheets, record profitability, enhanced asset quality, and impressive coverage that reaches over 98 percent of villages across India.
On Sunday, Finance Minister Nirmala Sitharaman proposed the formation of a high-level committee aimed at thoroughly reviewing the banking sector to ensure it aligns with the next phase of growth for the country.
During her budget presentation, Sitharaman emphasized the strengths of the banking sector, noting its strong balance sheets, historic profitability levels, improved asset quality, and the fact that more than 98 percent of villages are covered.
“At this point, we are in a great position to thoughtfully assess the measures needed to keep driving reform-led growth in this sector. I propose establishing a high-level committee on banking for Viksit Bharat to conduct a comprehensive review of the sector, ensuring it aligns with India’s next growth phase while also prioritizing financial stability, inclusion, and consumer protection,” she stated.
However, this announcement comes at a time when banks are struggling to attract deposits. Just the day before, State Bank of India (SBI) Chairman C S Setty urged for tax parity between bank deposits and equity investments, pointing out that the higher taxes on deposits are making it tough for banks to mobilize funds as more people are investing their savings in the stock market.
Back in September of last year, the finance ministry’s Department of Financial Services hosted a two-day event called ‘PSB Manthan’. During this gathering, the government discussed strategies to elevate public sector banks (PSBs) into globally competitive entities. They aim for at least one or two state-run banks to rank among the top 20 in the world by 2047.
Currently, SBI holds the position of the 43rd largest bank globally in terms of asset size, making it the only public sector bank in the top 100.
Restructuring of REC and PFC
Sitharaman shared that the vision for non-banking financial corporations (NBFCs) in Viksit Bharat includes specific targets for credit distribution and embracing technology.
“To scale up and enhance efficiency in public sector NBFCs, the first step is to restructure the Power Finance Corporation (PFC) and the Rural Electrification Corporation (REC),” Sitharaman explained. Following this announcement, shares of REC and PFC saw a boost, rising 4.3% and 5.9% during intraday trading, respectively.
Review of foreign exchange management rules
The Finance Minister has announced a thorough review of the rules governing foreign exchange management for non-debt instruments. The goal is to establish a more modern and user-friendly framework for foreign investments that aligns with India’s changing economic priorities.
Corporate bond market
Sitharaman has put forward a plan to create a market-making framework that would provide better access to funds and derivatives related to corporate bond indices. She also introduced the concept of a Total Return Swap (TRS) for corporate bonds. Essentially, a TRS is a financial derivative that allows one party to receive payments based on a fixed rate, while the other party benefits from the overall return of a reference asset, which could be anything from an equity index to a collection of loans or bonds.
Municipal bonds
To boost the issuance of larger municipal bonds by major cities, Sitharaman has suggested an incentive of Rs 100 crore for any single bond that exceeds Rs 1,000 crore in size.
The existing scheme under the Atal Mission for Rejuvenation and Urban Transformation (AMRUT), which currently encourages issuances of up to Rs 200 crore, will still be available to assist smaller and medium-sized towns.