New Delhi: In a decisive move to reinforce India’s financial architecture, Finance Minister Nirmala Sitharaman in the Union Budget 2026–27 announced plans to restructure key public sector financial institutions, including Power Finance Corporation (PFC) and REC (Rural Electrification Corporation). The announcements form part of a broader strategy to modernize banks, NBFCs, and infrastructure financiers, aiming to create a resilient and growth-ready financial system for Viksit Bharat.
Highlighting the government’s long-term vision, Sitharaman said a high-level committee would be formed to undertake a comprehensive review of the banking sector. This panel will examine capital adequacy, governance, risk management, cyber resilience, and the flow of credit to priority sectors, marking a shift from incremental reforms to a holistic re-examination of public and private banking operations.
“The committee will explore competition and consolidation possibilities, governance enhancements, and alignment with India’s long-term growth goals,” the finance minister noted, signaling potential changes in ownership norms, operational structures, and specialized banking functions.
The move is expected to strengthen depositors’ confidence and provide a more efficient framework for credit growth, while ensuring that public sector banks remain competitive and digitally robust in a rapidly evolving financial ecosystem.
Sitharaman also outlined a “Vision for NBFCs for Viksit Bharat”, underscoring the role of non-banking financial companies in serving sectors often underserved by traditional banks including MSMEs, rural borrowers, and niche industries. The vision proposes a regulated and clearly defined operational framework, integrating NBFCs into the national credit architecture while promoting stability and inclusion.
A key highlight of the Budget is the proposed restructuring of PFC and REC, both pivotal lenders to the power and infrastructure sectors. The reform aims to enhance operational efficiency, strengthen risk management, and broaden lending capabilities beyond traditional energy projects to wider infrastructure initiatives. Analysts note that a revitalized PFC and REC could unlock larger credit flows, reduce sectoral bottlenecks, and catalyze private investment in critical projects.
Together, these measures signal a paradigm shift in India’s financial system, balancing stability, inclusion, and growth, and aligning public financial institutions with the government’s 2047 Viksit Bharat vision. By reforming banks, NBFCs, and infrastructure financiers, the Budget sets the stage for a more resilient and future-ready credit ecosystem capable of supporting India’s ambitious economic goals.