Dated 09.02.2026 : The Union Budget 2026 has set the stage for a significant evolution in India’s financial architecture. Finance Minister Nirmala Sitharaman’s announcement of a High-Level Committee on Banking for Viksit Bharat signals that the government is no longer just looking at “managing” banks—it is looking at “reimagining” them for a $30 trillion economy.
Why a High-Level Committee Now?
India’s banking sector has undergone a massive cleanup over the last decade, transitioning from high NPAs to “twin balance sheet advantage.” However, to reach the goal of a developed nation by 2047, the current banking scale may not be enough.
The committee is expected to solve three critical puzzles:
- The Scale Gap: India needs banks that can compete on a global scale to fund massive infrastructure projects without creating systemic risks.
- Credit Penetration: With a focus on MSMEs and the “last mile,” the committee will likely explore how to deepen credit-to-GDP ratios.
- The NBFC Synergy: The proposed restructuring of PFC and REC suggests a move toward specialized, high-capacity lending institutions.
Key Pillars of the Upcoming Reforms
While the official Terms of Reference are being finalized, the roadmap is clear:
- Structural Agility: Moving beyond simple mergers toward “functional specialization.”
- Digital-First Governance: Integrating AI and real-time data into regulatory frameworks to prevent future stress.
Global Benchmarking: Ensuring Indian banks feature more prominently in the Top 50 global banks by asset size
The Human-AI Perspective
As we move toward this “Banking 2.0,” the intersection of human judgment and AI-driven analytics will be the cornerstone of risk management. A “Human-AI Certified” approach to finance ensures that while algorithms handle the data, ethical oversight and strategic vision remain firmly in human hands.
The formation of this committee isn’t just a bureaucratic step; it’s a strategic pivot. The next few months will be crucial as the panel outlines how Indian capital will fuel Indian ambition.
Latest Status (Post-Budget Update)
The Finance Minister recently clarified (as of February 8, 2026) that the government intends to constitute the “High-Level Committee on Banking for Viksit Bharat” at the “earliest.” While the exact names of the members haven’t been released yet, we now know more about the committee’s specific direction:
- Beyond Mergers: The FM explicitly stated that the committee’s mandate should not be “narrowed down” to just bank mergers. Instead, it is about “priming” the banking sector to fund a developed India.
- The “Mega-Lender” Vision: A core goal is to create a roadmap for Indian banks to reach the scale necessary to fund massive national infrastructure projects.
- NBFC First Step: The government has already moved on the first related reform—proposing the restructuring of the Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) to improve efficiency in public sector NBFCs.
- Regulatory Focus: It is expected to review sensitive issues like the 26% voting rights cap for promoters and the ownership structure of private banks to attract more investment.
“Note on AI Usage: This post was written with the assistance of AI tools for research, drafting, and image generation. All content has been human-reviewed and edited for accuracy and tone to ensure it meets our quality standards.”
To go through our AI Policy , CLICK HERE
