Reforms in financial sector: Panel for Viksit Bharat Vision

Finance Minister Nirmala Sitharaman proposed a high-level Banking Committee for Viksit Bharat, restructuring key financial institutions, reviewing FEMA rules, promoting corporate and municipal bonds, and easing foreign investment limits to strengthen India’s banking sector and boost ease of doing business

New Delhi: In her Union Budget speech for 2026-27, Finance Minister Nirmala Sitharaman outlined several forward-looking proposals in the financial sector, aimed at strengthening India’s banking system and enhancing ease of doing business as the country progresses towards the goal of Viksit Bharat.

A major announcement was the proposal to establish a high-level committee on Banking for Viksit Bharat. This panel will conduct a comprehensive review of the entire banking sector, including banks and non-banking financial companies.

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The objective is to align the sector with India’s next phase of economic growth, while ensuring financial stability, greater inclusion, and strong consumer protection.

Finance Minister Sitharaman highlighted the sector’s current strengths, such as robust balance sheets, record profitability, and near-universal access to banking services, with 98 per cent of villages now covered. The committee will recommend reforms to improve efficiency, scale, and preparedness for future challenges.

To bolster public sector financial institutions in the power domain, the minister proposed restructuring Power Finance Corporation and Rural Electrification Corporation. This step seeks to achieve greater scale and operational efficiency in these key non-banking entities, supporting infrastructure financing and the government’s push for energy sector development.

She also announced a comprehensive review of the Foreign Exchange Management Act non-debt instruments rules. The aim is to create a more contemporary and user-friendly framework for foreign investments, consistent with evolving economic priorities.

This move is expected to simplify procedures and attract more global capital into Indian markets.

On deepening bond markets, proposals were made to promote corporate and municipal bonds. Incentives include measures to encourage larger issuances by municipal corporations, fostering alternative funding sources for urban infrastructure.

In a significant step toward ease of doing business and broader foreign participation, individuals residing outside India will now be permitted to invest in equity instruments of listed Indian companies through the portfolio investment scheme.

Additionally, the investment limit for each such individual is proposed to increase from five per cent to ten per cent, with the overall combined limit for all such investors rising from ten per cent to 24 per cent. This change is designed to boost liquidity in equity markets and draw more diverse international investment.

Market reactions were positive, with shares of related entities showing gains amid optimism over the proposed changes. The proposals signal a proactive approach to fortifying India’s financial architecture amid global uncertainties.