The finance minister mentioned that 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.

FM proposed setting up of a “High Level Committee on Banking for Viksit Bharat”, to comprehensively review the sector and align it with India’s next phase of growth, while safeguarding financial stability, inclusion and consumer protection.

The vision for NBFCs for Viksit Bharat has been outlined with clear targets for credit disbursement and technology adoption. In order to achieve scale and improve efficiency in the Public Sector NBFCs, as a first step, it is proposed to restructure the Power Finance Corporation and Rural Electrification Corporation

A dedicated Rs 10,000 crore SME Growth Fund, to be introduced, to create future Champions, incentivizing enterprises based on select criteria.

Self-Reliant India Fund to be allocated with additional Rs 2,000 crore, to continue support to micro enterprises and maintain their access to risk capital.

Government to restructure the Power Finance Corporation and Rural Electrification Corporation to achieve scale and improve efficiency in the Public Sector NBFCs.

Debt-to-GDP ratio is estimated to be 55.6% of GDP in BE 2026-27, compared to 56.1% of GDP in RE 2025-26. In RE 2025-26, the fiscal deficit has been estimated at par with BE of 2025-26 at 4.4% of GDP. In line with the new fiscal prudence path of debt consolidation, the fiscal deficit in BE 2026-27 is estimated to be 4.3% of GDP.

The Revised Estimates of the non-debt receipts are Rs 34 lakh crore of which the Centre’s net tax receipts are Rs 26.7 lakh crore. The Revised Estimate of the total expenditure is Rs 49.6 lakh crore, of which the capital expenditure is about Rs 11 lakh crore.

The non-debt receipts and the expenditure are estimated as Rs 36.5 lakh crore in 2026-27 and Rs 53.5 lakh crore respectively. The Centre’s net tax receipts are estimated at Rs 28.7 lakh crore.

To finance the fiscal deficit, the net market borrowings from dated securities are estimated at Rs 11.7 lakh crore. The balance financing is expected to come from small savings and other sources. The gross market borrowings are estimated at Rs 17.2 lakh crore.

Stocks to watch

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

Outlook

The Union Budget 2026-27 has focused on fiscal consolidation and growth. The fiscal deficit is targeted to reduce to 4.3% of GDP in 2026-27 from 4.4% in 2025-26. However, the net market borrowing of the government are estimated to increase 13% to Rs 11.7 lakh crore in 2026-27, which may put some pressure on bond yields. The pressure on interest rate may have negative impact on banking and financial sector. The FM has announced to set up a high-level committee to comprehensively review the banking sector, so there will be eyes on the development with respect to formation of the committee ahead. The objective and impact of the proposed restructuring of PFC-REC will be also under watch.