Union Budget 2026: Strengthening Banking and NBFCs for Sustainable Growth
Gyanesh DSIJ / 01 Feb 2026 / Categories: Mindshare, Trending
The Budget outlines structural measures to strengthen banks and public sector NBFCs. Aiming to improve credit delivery, governance, and long-term financial stability.
The Union Budget 2026–2027 places a strong, well-capitalised Banking system and resilient NBFC sector at the core of India’s growth strategy. Recognising their role in credit delivery, financial inclusion, and infrastructure financing, the government has outlined structural reforms aimed at improving efficiency, governance, and long-term stability across the financial ecosystem.
1. Strategic Direction for the Banking Sector
With banks reporting improved asset quality and robust profitability, the budget signals a shift from balance sheet repair to future-ready transformation.
High-Level Committee on Banking: The government will constitute a High-Level Committee on Banking for Viksit Bharat to undertake a comprehensive review of the sector. The committee will focus on strengthening governance frameworks, improving consumer protection, and aligning banking capacity with India’s next phase of economic expansion.
Long-Term Vision: The review is expected to address evolving credit needs, digital banking adoption, and risk management practices, laying the groundwork for a more agile and competitive banking system.
2. Reforms in Public Sector NBFCs
NBFCs continue to play a critical role in sectors underserved by traditional banks, including infrastructure, power, and rural financing.
Restructuring of PFC and REC: The government has proposed the restructuring of major public sector NBFCs—Power Finance Corporation (PFC) and Rural Electrification Corporation (REC)—to enhance scale, operational efficiency, and capital allocation.
Improved Credit Delivery: These changes aim to strengthen their ability to support India’s energy transition and infrastructure build-out through more efficient lending structures.
3. A New Vision for the NBFC Ecosystem
The budget outlines a forward-looking roadmap for NBFCs focused on modernization and expansion.
Technology Adoption: NBFCs will be encouraged to deepen digital capabilities to improve underwriting, monitoring, and customer outreach.
Credit Expansion Targets: The government has set clear expectations for enhanced credit disbursement, particularly to priority sectors and emerging businesses.
4. Implications for the Financial System
Collectively, these measures signal a calibrated approach toward building stronger institutions rather than short-term stimulus. For borrowers, this could translate into improved access to credit and better service delivery. For the broader economy, a healthier banking and NBFC framework strengthens financial stability and supports sustainable, long-term growth.
Overall, Budget 2026–27 reinforces the government’s commitment to creating a resilient financial architecture capable of supporting India’s development ambitions.
Disclaimer: The article is for informational purposes only and not investment advice.