Budget moots comprehensive review of financial sector, PFC, REC to be restructured

The Indian banking sector is heading for a major change with the Finance Minister Nirmala Sitharaman proposing to set up a ‘High Level Committee on Banking for Viksit Bharat’ to enable this sector lend differently. 

She said the committee will comprehensively review the financial sector and align it with India’s next phase of growth, “while safeguarding financial stability, inclusion and consumer protection.” 

“Indian banking sector today is characterised by strong balance sheets, historic highs in profitability, improved asset quality and coverage exceeding 98% of villages in the country,” she said while presenting the Union Budget 2026-27 in the Parliament. 

“High Level Committee to reform banks to suit, “Viksit” Bharat is a clear call to privatisation of public sector banks. Private banks work for profit and not priority-sector lending, rural credit access, and financial inclusion areas where public banks historically play a stabilising role,” said Amarjeet Kaur, General Secretary, All India Trade Union Congress said in a statement.

“The Finance Minister mentioned about rural branches in 98% villages, but does not recognise that this was possible because of Nationalised Banking,” she added.

Also keeping the future requirement in mind the budget has proposed to restructure the Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) to achieve scale and improve efficiency in the Public Sector NBFCs.

Abhishek Nath, Sector Head for Energy and Power at the think-tank CSTEP, said the move would help NBFCs align with present requirements. “Today, we have to look at various technologies, including RE and nuclear generation, as well as transmission and storage,” he stated, adding, “Although both institutions are mainly finance organisations and have been flexible enough to survive and prosper, a relook at their basic structure is in keeping with the evolving needs of the present time,” he said.

The budget proposal has outlined the vision for NBFCs for developed India with clear targets for credit disbursement and technology adoption.

The FM also proposed a comprehensive review of the Foreign Exchange Management (Non-debt Instruments) Rules in the Union Budget to create a more contemporary, user-friendly framework for foreign investments consistent with India’s evolving economic priorities.

The Budget has proposed measures to allow individuals present outside India to invest in equity instruments of listed Indian companies through the portfolio investment scheme.