India proposes new committee to review financial sector
The Indian government’s Union Budget for 2026-27 has proposed several structural changes to the financial sector, including the formation of a ‘High Level Committee on Banking for Viksit Bharat’.
Finance Minister Nirmala Sitharaman, presenting the budget in Parliament, said the committee’s purpose is to undertake a thorough examination of the financial sector and prepare it for the country’s next stage of growth.
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Changes are suggested for foreign investment rules.
The finance minister announced plans for a full review of the Foreign Exchange Management (Non-debt Instruments) Rules to establish a framework that is more aligned with current economic priorities and easier for investors to navigate.
Other proposals include introducing a market making mechanism for corporate bond indices, along with new provisions for total return swaps on corporate bonds.
These changes are intended to facilitate access to funds and derivatives in the bond market.
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By GlobalDataRegulations surrounding foreign portfolio investment are also set for revision.
Individual persons resident outside India will be allowed to invest in listed Indian company equity under the Portfolio Investment Scheme.
The individual investment ceiling is proposed to rise from 5% to 10%, with the overall cap for all such investors increasing from 10% to 24%.
Besides, the budget proposes to reorganise the Power Finance Corporation and Rural Electrification Corporation.
The aim is to “scale and improve efficiency in the Public Sector NBFCs,” the document read.
Sitharaman was quoted by The Economic Times as saying: “One point is about the high-level committee on banking reforms. As we have repeatedly noted, at least two major banks need to take the lead first. When I say a high-level committee will be formed, the terms of reference will need to be clearly defined. We are looking at a committee that examines the entire banking sector so it can provide recommendations to help us plan for banking in 2047.”
“Since 2047 is our long-term goal, we need to understand the steps required in the banking space today. Based on the committee’s recommendations, we will move forward accordingly. The Department of Financial Services will also play a key role in shaping the roadmap for 2047.”
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