• Source:JND

Union Budget 2026: Finance Minister Nirmala Sitharaman presented the Union Budget for 2026-27 on Sunday, unveiling significant reforms aimed at bolstering the Indian banking sector in line with India's ambition to become a Viksit Bharat. She proposed the establishment of a high-level committee on “Banking for Viksit Bharat” to recommend reforms designed to improve efficiency across the banking system, including non-banking financial companies (NBFCs).

The three main changes announced in the Union Budget 2026 were:

1. Formation of a High-Level Committee for Banking Sector Review

A high-level committee will be set up to conduct a comprehensive review of the banking sector. The proposed panel will examine structural reforms within 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 February 1, Finance Minister Sitharaman underscored the resilience of the financial sector, arguing that a decade of sustained reforms had placed Indian banking on a much stronger footing than in the past.

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2. Restructuring of Power Finance Corporation (PFC) and Rural Electrification Corporation (REC)

The Finance Minister announced the restructuring of government-owned non-banking financial companies (NBFCs) such as PFC and REC to enhance their size and efficiency. This restructuring is aimed at strengthening the financial sector and boosting overall economic growth. In 2019-2020, ten public sector banks were merged into four larger entities, reducing the number of public sector banks from 27 to 12.

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

Sitharaman emphasised the significance of the NBFC sector in strengthening the country’s financial framework. She announced the restructuring of government-owned NBFCs such as the Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) to increase their scale and improve efficiency.

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

“In order to achieve scale and improve efficiency in public sector NBFCs, as a first step, it is proposed to restructure the Power Finance Corporation and Rural Electrification Corporation,” Sitharaman added.

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3. Easing Foreign Investment Rules in the Stock Market

The government has liberalised rules for Foreign Residents Outside India (PROIs), allowing them to increase their investments in the Indian stock market. Individuals residing abroad can now invest in Indian stocks through the Portfolio Investment Scheme, Finance Minister Nirmala Sitharaman announced on Sunday, presenting the Union Budget 2026. The Portfolio Investment Scheme enables non-resident Indians and foreign investors to buy and sell Indian stocks through a special bank account approved by the Reserve Bank of India (RBI). It sets investment limits, typically 5 per cent per individual and 10 per cent per company, ensuring all transactions are in line with regulatory guidelines. Funds invested can be repatriated.


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