India’s federal budget for 2026–27 set out a series of measures for the financial sector, including a comprehensive review of the banking system, steps to deepen corporate and municipal bond markets, reforms for non-banking financial companies, and changes to foreign investment rules, Finance Minister Nirmala Sitharaman said in her budget speech to parliament on Saturday.
Presenting the proposals, Finance Minister Sitharaman said the Indian banking sector currently has strong balance sheets, improved asset quality and coverage across more than 98% of villages. Against this backdrop, she proposed setting up a High Level Committee on Banking for Viksit Bharat to review the sector and align it with India’s next phase of growth, while safeguarding financial stability, inclusion and consumer protection.
For non-banking financial companies, the Finance Minister said a vision for NBFCs for Viksit Bharat has been outlined with clear targets for credit disbursement and technology adoption. As an initial step to improve scale and efficiency in public sector NBFCs, the budget proposed the restructuring of Power Finance Corporation and Rural Electrification Corporation.
The budget also proposed a comprehensive review of the Foreign Exchange Management (Non-debt Instruments) Rules to create a more contemporary and user-friendly framework for foreign investments, consistent with India’s evolving economic priorities, according to the speech.
To deepen domestic debt markets, Finance Minister Sitharaman announced measures for the corporate bond market, including the introduction of a market-making framework with suitable access to funds and derivatives on corporate bond indices. The budget also proposed introducing total return swaps on corporate bonds.
On municipal finance, the Finance Minister proposed an incentive of ₹100 crore for a single municipal bond issuance of more than ₹1,000 crore to encourage large cities to access bond markets. She said the existing scheme under AMRUT, which incentivises municipal bond issuances of up to ₹200 crore, would continue to support smaller and medium towns.
As part of ease-of-doing-business measures in financial markets, the budget proposed allowing Individual Persons Resident Outside India (PROIs) to invest in equity instruments of listed Indian companies through the Portfolio Investment Scheme. Finance Minister Sitharaman said the individual investment limit under this scheme would be increased from 5% to 10%, while the overall investment limit for all individual PROIs would be raised from 10% to 24%.
The Finance Minister said these financial sector measures are intended to strengthen capital mobilisation, improve market depth and support India’s long-term growth objectives alongside reforms announced in other sectors of the economy.