4. High-Level Committee on Banking for Viksit Bharat

The Union Budget 2026-27 has proposed the establishment of a \'High-Level Committee on Banking for Viksit Bharat\' to overhaul India\'s financial architecture. The primary objective is to create \'mega-lenders\' with the capital depth required to fund large-scale infrastructure and developmental projects necessary for India to become a developed economy by 2047. • Blueprint for Mega-Lenders: The committee is tasked with designing a roadmap to scale up Indian banks so they can compete globally and meet the credit demands of a $30 trillion economy. • Restructuring Public Sector NBFCs: As a precursor to broader banking reforms, the government has announced the merger of Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) to improve operational efficiency and capital scaling.

• Balancing Stability and Growth: While aiming for size, the mandate emphasizes maintaining financial stability, deepening financial inclusion, and ensuring robust consumer protection. • Consolidation over Mere Mergers: The Finance Minister clarified that the goal is not just reducing the number of banks through mergers, but \'priming\' the sector to ensure credit reaches both large industries and the common man. • PFC-REC Merger Significance: The integration of these two Navratna CPSEs (with PFC already holding a 52.63% stake in REC) aims to consolidate power-sector lending under a single, more efficient entity. • Focus on Credit Flow: The committee will investigate structural barriers that prevent seamless credit flow to emerging sectors, ensuring that the banking system acts as a catalyst for the \'Viksit Bharat\' vision. Key Definitions • Viksit Bharat: The government\'s vision to transform India into a developed nation by the 100th anniversary of its independence in 2047. • NBFC (Non-Banking Financial Company): A company registered under the Companies Act that provides banking services like loans and credit facilities but does not hold a full banking license or accept demand deposits. • Navratna CPSE: A status granted to select Central Public Sector Enterprises giving them greater financial autonomy to invest up to Rs.1000 crore without explicit government approval. Constitutional & Legal Provisions • Article 246 (Seventh Schedule): Banking is a Union List subject (Entry 45), giving the Parliament exclusive power to legislate on matters related to the banking sector. • Banking Regulation Act, 1949: Provides the legal framework for the supervision and regulation of commercial banks in India. • RBI Act, 1934: Governs the functions of the Reserve Bank of India as the central monetary authority and regulator of the banking system. • Companies Act, 2013: Governs the restructuring and merger processes of corporate entities, including public sector NBFCs like PFC and REC. Additional Key Points • Global Benchmarking: Currently, Indian banks are relatively small on the global stage; the reform seeks to place more Indian entities in the top 100 global banks. • Synergy in Power Sector: The PFC-REC merger is expected to reduce borrowing costs and eliminate duplicate administrative roles, specifically in funding green energy transitions. Conclusion The constitution of this high-level panel signifies a shift from \'reactive\' banking reforms (addressing NPAs) to \'proactive\' structural scaling. By consolidating NBFCs and rethinking the banking blueprint, the government aims to ensure that the financial sector does not become a bottleneck but rather the engine for India\'s long-term growth trajectory. UPSC Relevance • GS Paper III (Indian Economy): Mobilization of resources, banking reforms, and the role of NBFCs in infrastructure financing. • GS Paper II (Governance): Government policies and interventions for development in various sectors and issues arising out of their design and implementation.• Prelims Factor: Knowledge of PFC/REC status, the difference between Banks and NBFCs, and the specific objectives of the \'Viksit Bharat\' initiative.