Union Budget 2026–27: FM Sitharaman lays out comprehensive financial sector reform roadmap

Union Finance Minister Nirmala Sitharaman on Sunday said the Indian banking sector is marked by strong balance sheets, historic highs in profitability and improved asset quality, with banking coverage extending to more than 98 per cent of villages across the country, positioning it well for the next phase of reform-led growth.

Presenting the Union Budget 2026–27 in Parliament, Sitharaman said the current strength of the banking system provides the foundation to futuristically evaluate measures required to continue reforms while supporting economic expansion.

As part of this process, the Finance Minister proposed the establishment of a High-Level Committee on Banking for Viksit Bharat to undertake a comprehensive review of the banking sector. She said the committee will work to align the sector with India’s next phase of growth, while safeguarding financial stability, promoting inclusion and ensuring consumer protection.

Outlining the government’s vision for non-banking financial companies (NBFCs) under Viksit Bharat, Sitharaman said clear targets have been set for credit disbursement and technology adoption. To enable public sector NBFCs to achieve scale and improve efficiency, she announced that, as a first step, the Power Finance Corporation (PFC) and the Rural Electrification Corporation (REC) will be restructured.

The Finance Minister also proposed a comprehensive review of the Foreign Exchange Management (Non-Debt Instruments) Rules to establish a more contemporary and user-friendly framework for foreign investments, in line with India’s evolving economic priorities.

To deepen the corporate bond market, Sitharaman said the government proposes to introduce a market-making framework with suitable access to funds and derivatives on corporate bond indices. She also announced the introduction of total return swaps on corporate bonds to enhance market depth and liquidity.

In a bid to encourage higher-value municipal bond issuances by large cities, the Finance Minister proposed an incentive of Rs 100 crore for a single bond issuance exceeding Rs 1,000 crore. She added that the existing incentive scheme under the AMRUT programme, which supports municipal bond issuance of up to Rs 200 crore, will continue to benefit small and medium towns.