High-Level Banking Committee for Viksit Bharat

Context

It has been declared that Viksit Bharat will be constituted by a High-Level Committee on Banking by the Union Government.

Key Highlights

The committee strives to develop a long term blueprint to the banking sector of India in support of the Viksit Bharat (Developed India).

High-Level Banking Committee Objective

• To examine the banking system structure, capacity and efficiency of the banking system in India.
• To have banks that are big, strong and able to finance the demands of:
  • Infrastructure development
  • Industrial expansion
  • MSMEs and startups
  • Far reaching credit delivery to the ordinary citizen.
• To reconcile the growth with financial stability, inclusion and consumer protection.

Not Limited to Bank Mergers

• The Finance Minister made it clear that:
  • The mandate of the committee must not be restricted to bank mergers in the public sector only.
  • This is aimed at ensuring that the whole banking ecosystem is big enough and future proofed.
• Potential areas of investigation are:
  • Balance sheet strength and capital adequacy.
  • Governance reforms
  • Risk management systems
  • Online banking and technology adoption.

Budget 2026–27: First Step Through NBFC Restructuring

• This was one of the first reform steps, which was aimed at restructuring NBFCs in the public sector.
• Focus on:
  • Power Finance Corporation (PFC).
  • Rural Electrification Corporation (REC)
• Objective:
  • Attain economies of scale, efficiency and operational synergy in power sector capital.

PFC–REC Merger: Significance

• Since 2019, PFC has been a parent company to:
  • Purchase of 52.63 percent in Government of India by PFC.
• Both entities:
  • Are Navratna CPSEs.
  • Considerably important in funding generation, transmission, and distribution of power.
• PFC Board has granted the in-principle merger between REC and itself.
• This aligns with:
  • The wider policy of sectoral consolidation by the government.
  • Establishing more powerful, more specific financial institutions.

Way Forward

• The High-Level Committee ought to:
  • Encourage other structural reforms other than mergers such as governance and capital reforms.
  • Increase credit to priority sectors but quality of assets.
  • Make banking fintech, AI and digital public infrastructure.
  • Increase the coordination of banks, NBFCs, and capital markets.
• A powerful banking network is necessary to tap long term capital in India to develop the country.

Source: The Hindu

Mains PYQ

(Q) Pradhan Mantri Jan Dhan Yojana (PMJDY) is necessary for bringing unbanked to the institutional finance fold. Do you agree with this for financial inclusion of the poorer section of the Indian society? Give arguments to justify your opinion. (2016)

• Viksit Bharat to have High-Level Committee on Banking established.
• Pay special attention to the development of mega, efficient and resilient lenders.
• Not limited to mergers of banks in the public sector.
• PFC-REC restructuring is the original reform proposal by Budget.
• Banking reforms were in line with growth, stability and inclusion.

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