**Executive Summary**
The Union Budget 2026-27, presented on February 1, 2026, proposes measures to align the financial sector with India's next phase of growth under the "Viksit Bharat" initiative. Key proposals include setting up a High Level Committee on Banking, restructuring of the Power Finance Corporation and Rural Electrification Corporation, introducing a market-making framework for corporate bond indices, incentivizing municipal bond issuances, and increasing investment limits for Persons Resident Outside India (PROI). The Union Budget also plans for comprehensive reviews of the financial sector.
**Key Points / Main Content**
* **High Level Committee on Banking:**
* A "High Level Committee on Banking for Viksit Bharat" will be established.
* The Committee will comprehensively review the banking sector.
* **Restructuring of Public Sector NBFCs:**
* The Power Finance Corporation and Rural Electrification Corporation will be restructured.
* The aim is to achieve scale and improve efficiency in Public Sector NBFCs.
* **Corporate Bonds:**
* A market-making framework with suitable access to funds and derivatives will be introduced for corporate bond indices.
* This includes a proposal for total return swaps on corporate bonds.
* **Municipal Bonds:**
* An incentive of ₹100 crore will be offered for a single municipal bond issuance of more than ₹1000 crore.
* The incentive aims to encourage the issuance of municipal bonds of higher value by large cities.
* The existing AMRUT scheme will continue to support smaller and medium towns with incentives up to ₹200 crore.
* **Portfolio Investment Scheme (PROI):**
* Individual Persons Resident Outside India (PROI) will be permitted to invest in equity instruments of listed Indian companies through the Portfolio Investment Scheme.
* The investment limit for an individual PROI under the scheme will increase from 5% to 10%.
* The overall investment limit for all individual PROIs will increase from 10% to 24%.
* **Foreign Exchange Management (Non-debt Instruments) Rules:**
* The Foreign Exchange Management (Non-debt Instruments) Rules will undergo a comprehensive review.
* The review aims to create a more contemporary, user-friendly framework for foreign investments.
**Impact Analysis**
**Financial Institutions:**
* **Impact:** Subject to review under the new banking committee and the restructuring plans for Power Finance Corporation and Rural Electrification Corporation.
* **Action Required:** Await guidance from the High Level Committee and prepare for potential restructuring or changes to operational procedures.
**Large Cities:**
* **Impact:** Opportunity to access incentives for issuing municipal bonds of higher value.
* **Action Required:** Evaluate the feasibility of issuing bonds exceeding ₹1000 crore to qualify for the ₹100 crore incentive.
**Persons Resident Outside India (PROI):**
* **Impact:** Increased opportunity to invest in Indian equity markets through the Portfolio Investment Scheme.
* **Action Required:** Review investment strategies and adjust portfolio allocations to take advantage of the increased investment limits.
Key Entities Referenced
Union Budget 2026-27: The central government's annual financial statement, outlining proposed policies and fiscal measures for the upcoming financial year.
High Level Committee on Banking for Viksit Bharat: A committee to be set up to comprehensively review the financial sector and align it with India's next phase of growth.
Power Finance Corporation: A financial institution that the Union Budget proposes to restructure to achieve scale and improve efficiency.
Rural Electrification Corporation: A financial institution that the Union Budget proposes to restructure to achieve scale and improve efficiency.
Portfolio Investment Scheme: A scheme that allows Persons Resident Outside India to invest in equity instruments of listed Indian companies.
Ministry of Finance
‘HIGH LEVEL COMMITTEE ON BANKING FOR
VIKSIT BHARAT’ TO ALIGN FINANCIAL SECTOR
WITH INDIA’S NEXT PHASE OF GROWTH:
UNION BUDGET 2026-27
GOVERNMENT TO RESTRUCTURE THE POWER FINANCE
CORPORATION AND RURAL ELECTRIFICATION
CORPORATION TO ACHIEVE SCALE AND IMPROVE
EFFICIENCY
UNION BUDGET PROPOSES A MARKET MAKING
FRAMEWORK WITH SUITABLE ACCESS TO FUNDS AND
DERIVATIVES ON CORPORATE BOND INDICES
TO ENCOURAGE THE ISSUANCE OF MUNICIPAL BONDS OF
HIGHER VALUE, INCENTIVE OF ₹100 CRORE FOR A SINGLE
BOND ISSUANCE OF MORE THAN ₹1000 CRORE
INDIVIDUAL PERSONS RESIDENT OUTSIDE INDIA TO BE
PERMITTED TO INVEST IN EQUITY INSTRUMENTS OF
LISTED INDIAN COMPANIES THROUGH THE PORTFOLIO
INVESTMENT SCHEME
प्रव तथ: 01 FEB 2026 12:45PM by PIB Delhi
The Union Budget 2026-27 proposes to set up a ‘High Level Committee on Banking for Viksit Bharat’.
Presenting the Union Budget in Parliament today, the Union Minister of Finance and Corporate Affairs
Smt. Nirmala Sitharaman said that it will comprehensively review the financial sector and align it with
India’s next phase of growth, while safeguarding financial stability, inclusion and consumer protection.
Indian banking sector today is characterised by strong balance sheets, historic highs in profitability,
improved asset quality and coverage exceeding 98% of villages in the country, the Union Budget noted.
The Union Budget proposes to restructure the Power Finance Corporation and Rural Electrification
Corporation to achieve scale and improve efficiency in the Public Sector NBFCs. The vision for NBFCs
for Viksit Bharat has been outlined with clear targets for credit disbursement and technology adoption.Smt. Nirmala Sitharaman proposes a comprehensive review of the Foreign Exchange Management (Non-
debt Instruments) Rules in the Union Budget to create a more contemporary, user-friendly framework for
foreign investments consistent with India’s evolving economic priorities.
The Union Budget 2026-27 also proposes for a market making framework with suitable access to funds
and derivatives on corporate bond indices along with a proposal for total return swaps on corporate bonds.
To encourage the issuance of municipal bonds of higher value by large cities, the Union Budget proposes
an incentive of ₹100 crore for a single bond issuance of more than ₹1000 crore. The current scheme under
AMRUT which incentivises issuances up to ₹200 crore, will also continue to support smaller and medium
towns.
To enhance ease of doing business, Individual Persons Resident Outside India (PROI) will be permitted to
invest in equity instruments of listed Indian companies through the Portfolio Investment Scheme. The
Union Budget also proposes to increase the investment limit for an individual PROI under this scheme
from 5% to 10%, with an overall investment limit for all individual PROIs to 24%, from the current 10%.
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