Banking for 2047: Sitharaman proposes high-level committee to review sector under Viksit Bharat

Feb 1, 2026

Synopsis
Union Budget 2026: India's banking sector is strong with improved balance sheets and high profits. Finance Minister Nirmala Sitharaman announced a high-level committee to review the system. This panel will chart the next phase of reform-led growth. It will also look at the role of Non-Banking Financial Companies. Public sector NBFCs will be restructured to improve efficiency and focus on key sectors.

Finance Minister Nirmala Sitharaman on Sunday proposed the setting up of a high-level committee to comprehensively review India’s banking sector and chart the next phase of reform-led growth, citing the system’s improved balance sheets, profitability and near-universal reach.

“In the financial sector, the Indian banking sector today is characterised by strong balance sheets, historic highs in profitability, improved asset quality and coverage exceeding 98%,” Sitharaman said. “At this juncture, we are well placed to futuristically evaluate the measures needed to continue on the path of reform-led growth of this sector.”

Sitharaman said, “One point is about the high-level committee on banking reforms. As we have repeatedly noted, at least two major banks need to take the lead first. When I say a high-level committee will be formed, the terms of reference will need to be clearly defined. We are looking at a committee that examines the entire banking sector so it can provide recommendations to help us plan for banking in 2047."

"Since 2047 is our long-term goal, we need to understand the steps required in the banking space today. Based on the committee’s recommendations, we will move forward accordingly. The Department of Financial Services will also play a key role in shaping the roadmap for 2047.”

Announcing the formation of a high-level committee on banking for Viksit Bharat, the finance minister said the panel would review the structure, efficiency and preparedness of the banking system and align it with India’s next phase of economic expansion, while “safeguarding financial stability, inclusion and consumer protection”.

The proposed committee is expected to examine the evolving role of banks in financing growth, improving credit delivery, adopting technology, strengthening governance standards and managing emerging risks in an increasingly complex financial system.

Alongside banks, Sitharaman laid out a clear roadmap for non-banking financial companies (NBFCs) as part of the Viksit Bharat vision. She said the government has outlined specific targets for credit disbursement and technology adoption for NBFCs, particularly those in the public sector.

“In order to achieve scale and improve efficiency in the public sector NBFCs, as a first step, it is proposed to restructure NBFCs into the Power Finance Corporation and the Rural Electrification Corporation,” she said, signalling a consolidation push aimed at strengthening development finance institutions focused on the power and infrastructure sectors.

The finance minister also announced a comprehensive review of India’s foreign investment rules, proposing an overhaul of the Foreign Exchange Management (Non-Debt Instruments) Rules to make them more contemporary and investor-friendly. “I propose a comprehensive review of the foreign exchange management non-debt instruments rules to create a more contemporary, user-friendly framework for foreign investments consistent with India’s evolving economic priorities,” she said.

As part of efforts to deepen domestic capital markets, Sitharaman proposed several measures to boost the corporate bond market. These include the introduction of a market-making framework with suitable access to funds, as well as derivatives on corporate bond indices to improve liquidity and price discovery.

She also proposed introducing total return swaps on corporate bonds, a move aimed at enhancing risk management tools for investors and encouraging greater participation in the bond market.

To strengthen municipal finances and encourage large-scale bond issuances by urban local bodies, the finance minister announced enhanced incentives for municipal bonds. “To encourage the issuance of municipal bonds of higher value by larger cities, I propose an incentive of ₹100 crore for a single bond issuance of more than ₹1,000 crore,” she said.

At the same time, Sitharaman said existing schemes would continue to support smaller and medium towns. Under the current framework, issuances of up to ₹200 crore remain incentivised, ensuring access to bond markets across a wider set of urban centres.

The package of measures underscores the government’s intent to leverage the banking sector’s renewed strength to drive long-term growth, while simultaneously modernising regulation, deepening capital markets and improving access to long-term finance for infrastructure and urban development—all within a framework that prioritises stability, inclusion and consumer protection.

[The Economic Times]