The budget has proposed significant enhancement of credit availability with guarantee cover to improve access to credit for Micro and Small Enterprises, from Rs 5 crore to Rs 10 crore, leading to additional credit of Rs 1.5 lakh crore in the next 5 years. For Startups, from Rs 10 crore to 20 crore, with the guarantee fee being moderated to 1% for loans in 27 focus sectors important for Atmanirbhar Bharat and for well-run exporter MSMEs, for term loans up to Rs 20 crore.

Customized Credit Cards will be introduced with a Rs 5 lakh limit for micro enterprises registered on Udyam portal. In the first year, 10 lakh such cards will be issued.

PM SVANidhi scheme has benefitted more than 68 lakh street vendors giving them respite from high-interest informal sector loans. Building on this success, the scheme will be revamped with enhanced loans from banks, UPI linked credit cards with Rs 30,000 limit, and capacity building support.

Under the Special Window for Affordable and Mid-Income Housing (SWAMIH) fifty thousand dwelling units in stressed housing projects have been completed, and keys handed over to home-buyers. Another forty thousand units will be completed in 2025, further helping middle-class families who were paying EMIs on loans taken for apartments, while also paying rent for their current dwellings.

Building on this success, SWAMIH Fund 2 will be established as a blended finance facility with contribution from the Government, banks and private investors. This fund of Rs 15,000 crore will aim for expeditious completion of another 1 lakh units.

NaBFID will set up a ‘Partial Credit Enhancement Facility’ for corporate bonds for infrastructure.

Public Sector Banks will develop ‘Grameen Credit Score’ framework to serve the credit needs of SHG members and people in rural areas.

The revamped Central KYC Registry will be rolled out in 2025 for simplifying the KYC process and i implement a streamlined system for periodic updating.

Under the Financial Stability and Development Council, a mechanism will be set up to evaluate impact of the current financial regulations and subsidiary instructions. It will also formulate a framework to enhance their responsiveness and development of the financial sector.

Centre budgets dividend of Rs 2.6 lakh crore from the RBI and PSBs, higher than Rs 2.3 lakh crore last year, suggesting another bumper dividend from the RBI.

Dividends from PSUs budgeted at Rs 69000 crore in FY26, reflecting a growth of 25.5%, following a 15.9% decline in FY25.

FY25 fiscal deficit revised lower to 4.8% of GDP from budgeted 4.9%. FY26 fiscal deficit budgeted at 4.4% of GDP

Gross borrowings are pegged at Rs 14.8 lakh crore for FY26 compared to Rs 14.01 lakh crore for FY25. On a net basis, net borrowings are targeted at Rs 11.54 lakh crore compared to the lower revised net borrowing for FY25 at Rs 10.7 lakh crore. The reliance on small savings for financing the fiscal deficit in FY26 has gone down to Rs 3.4 lakh crore from Rs 4.1 lakh crore in FY25 RE.

TDS for senior citizens deposits increased to Rs 1 lakh from Rs 50,000. Senior citizens are holding around 20% of the deposits of the banking system and around 38% of the individual deposits.

India Post with 1.5 lakh rural post offices, complemented by the India Post Payment Bank and a vast network of 2.4 lakh Dak Sevaks, will be repositioned to act as a catalyst for the rural economy.

India Post will also be transformed as a large public logistics organization. This will meet the rising needs of Viswakarmas, new entrepreneurs, women, self-help groups, MSMEs, and large business organizations.

Government will provide support to NCDC for its lending operations for the cooperative sector

Stocks to watch

State Bank of India, Bank of Baroda, Union Bank of India, Axis Bank, ICICI Bank, HDFC Bank

Outlook

The Union Budget 2025 -26 was presented in the backdrop of a slower GDP growth, high inflation and weak Rupee. The government has given a big push for private consumption, while reducing the Income Tax burden on the middle-class with no tax up to an income of Rs 12 lakh. There is not specific major announcement for the banking sector in budget. However, the government has stuck to fiscal consolidation path and targets to reduce fiscal deficit to 4.4% of GDP in 2025-26. The targeted decline in the fiscal deficit and comfortable gross market borrowing plan of Rs 14.8 lakh crore for FY2026 would assist decline in the bond yields. The lower interest rate would benefit banking and financial sector.