Sitharaman Forms High-Level Banking Committee for Viksit Bharat

Union Finance Minister Nirmala Sitharaman has announced the establishment of a 'High-Level Committee on Banking for Viksit Bharat' (Developed India), a significant move aimed at comprehensively reviewing India's banking sector and aligning it with the nation's ambitious future growth trajectory. The announcement was made during her Budget speech on February 1, 2026, emphasizing the government's commitment to fortifying the financial system to support India's vision of becoming a developed economy. The primary objective of this high-level committee is to craft a strategic roadmap for the development of large, globally competitive lenders capable of meeting the substantial financial requirements of a 'Viksit Bharat'. Sitharaman underscored the crucial role of this initiative in ensuring that banking facilities are robust and accessible enough to fund India's journey toward becoming a developed nation. Speaking to PTI videos on February 8, 2026, the Finance Minister clarified that the committee's mandate should not be narrowly interpreted as solely focusing on the merger of public sector banks. Instead, its broader goal is to ensure India's banking sector is adequately scaled and primed to handle the extensive funding needs associated with the 'Viksit Bharat' destination. This involves extending credit, financing, and banking facilities to the common person across the country. The committee is tasked with examining both the structural and regulatory aspects of the banking sector. It will recommend measures to enhance financial stability, deepen financial inclusion, and improve consumer protection, all while supporting India's long-term development objectives. The scope of its review is expected to encompass the entire banking ecosystem, including cooperative banks and regional rural banks. Sitharaman highlighted the current robust health of the Indian banking system, characterized by strong balance sheets, record-high profitability, improved asset quality, and extensive banking coverage across over 98 percent of villages. She noted that at this critical juncture, a forward-looking evaluation is essential to sustain the reform-led growth witnessed in the sector. Beyond the committee, the Budget also outlined a vision for Non-Banking Financial Companies (NBFCs), proposing defined targets for credit expansion and technology adoption. As a preparatory step towards improving the scale and efficiency of public sector NBFCs, the Finance Minister announced the restructuring of the Power Finance Corporation (PFC) and Rural Electrification Corporation (REC). Corroborating this, the boards of both PFC and REC have since given their in-principle approval for a merger. This follows PFC's prior acquisition of a 52.63% stake in REC, establishing a holding-subsidiary structure. The move, approved by PFC's Board of Directors on February 6, 2026, aligns directly with the Budget's objective to enhance efficiency and scale in public sector NBFCs. The merged entity is expected to retain its status as a 'Government Company' and is poised to create a formidable institution in infrastructure financing. The government also plans to strengthen the corporate bond market by introducing a market-making framework with access to funds and derivatives on corporate bond indices, and total return swaps on corporate bonds. Additionally, larger cities issuing high-value municipal bonds will be incentivized, and a comprehensive review of Foreign Exchange Management (Non-Debt Instruments) Rules will be undertaken to create a more contemporary and user-friendly framework for foreign investments. Overall, the establishment of the high-level banking committee, coupled with the restructuring efforts for NBFCs like PFC and REC, signifies a concerted effort by the Indian government to retool and strengthen its financial sector. The objective is to ensure it is adequately equipped to drive economic expansion and support the comprehensive funding requirements of 'Viksit Bharat'. The committee's recommendations are anticipated to provide a crucial blueprint for future reforms, focusing on sustainable growth, financial stability, and broader economic development.

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