India’s Union Budget 2026, presented by Finance Minister Nirmala Sitharaman on February 1, 2026, emphasizes financial sector reforms under the Viksit Bharat vision. It highlights the banking system’s strong balance sheets and profitability while announcing measures to enhance efficiency, inclusion, and growth.
High-Level Banking Committee
The budget proposes a high-level committee to review the banking sector’s structure, efficiency, and preparedness for future growth. This panel will focus on credit delivery, technology adoption, governance, and risk management while ensuring financial stability and consumer protection.
The initiative recognizes banks’ improved asset quality and near-100% coverage, positioning them for reform-led expansion.
NBFC Restructuring and Targets
Public sector NBFCs face restructuring for scale and efficiency, with specific targets for credit disbursement and tech adoption. This aims to boost lending in priority areas like MSMEs and infrastructure.
Banks may see indirect benefits through co-lending and risk-sharing with NBFCs.
MSME Credit Enhancements
Customized ₹5 lakh credit cards for 10 lakh Udyam-registered micro enterprises and term loans up to ₹2 crore for 5 lakh first-time entrepreneurs (including women, SC/ST) will drive demand for bank credit. Revised MSME classification raises investment/turnover thresholds, easing access.]
Credit guarantee covers double to ₹10 crore for MSEs and ₹20 crore for exporters/startups, reducing bank risk.
Insurance and Credit Reforms
FDI in insurance rises to 100%, potentially increasing banks’ bancassurance business. NaBFID’s partial credit enhancement for infrastructure bonds aids project financing, while ‘Grameen Credit Score’ targets rural/SHG lending.
Revamped Central KYC rollout in 2025 streamlines onboarding.
Regulatory Alignment
Upcoming RBI rules from January 2026 mandate digital banking approvals, free services for BSBD accounts, higher liquidity for digital deposits, and ringfencing core functions by 2028. Budget reforms complement these for compliance and innovation.
Banks must prepare for enhanced governance and tech integration.
