The Centre is preparing to set up a high-powered committee to examine the next phase of banking sector reforms, Finance Minister Nirmala Sitharaman said on Monday. The proposed panel, called the High-Level Committee on Banking for Viksit Bharat, will review the banking sector and suggest measures to make lenders better equipped to meet the financial requirements of a growing Indian economy.
The announcement came during the two-day PSB Confluence 2026 in New Delhi, where senior officials, public sector bank executives and representatives of public financial institutions discussed the challenges and opportunities facing the banking industry.
Sitharaman said the government would announce the committee soon and indicated that the discussions at the confluence would provide useful inputs for its work. The government wants the banking sector to be prepared for India’s long-term development ambitions, particularly the goal of becoming a developed economy by 2047.
The committee was first proposed in the Union Budget 2026-27. The Budget stated that the panel would undertake a comprehensive review of the banking sector and align it with the country’s next phase of growth while safeguarding financial stability, financial inclusion and consumer protection.
The government believes the timing is favourable for undertaking fresh reforms. Indian banks have strengthened their balance sheets in recent years, while asset quality has improved sharply. Sitharaman pointed to the historically low level of non-performing assets (NPAs) as evidence that the banking system is now in a stronger position to take on another round of reforms.
The improvement is particularly visible among public sector banks (PSBs). Their gross NPA ratio declined to 1.93% at the end of March 2026, while the net NPA ratio fell to 0.39%. The improvement follows years of efforts to recognise stressed assets, strengthen bank balance sheets and improve recovery mechanisms.
The proposed reforms are therefore expected to focus less on repairing past weaknesses and more on preparing banks for future demands. With credit requirements expected to rise as investment and economic activity expand, banks will need to strengthen their ability to finance businesses, infrastructure and emerging sectors without compromising financial stability.
The PSB Confluence provided a glimpse of some of the issues that could become part of the broader reform discussion. The first day of the meeting focused on deposit mobilisation, banking for youth, supporting the investment cycle and global capability centres (GCCs).
Deposit mobilisation has become an important priority as banks look to support credit growth. A stronger deposit base will be essential for lenders to expand advances while maintaining healthy liquidity and funding conditions.
The government is also looking at how banks can better serve India’s young population. Sitharaman highlighted the importance of developing banking products and services suited to younger customers, including those entering the workforce, pursuing higher education or starting businesses.
Another major area is the country’s investment cycle. As private and public investment gathers pace, banks will have an important role in providing financing to businesses and projects. The government wants lenders to be ready to respond to emerging credit demand while maintaining prudent risk management.
The rapid expansion of global capability centres is also creating new opportunities for banks. Multinational companies are increasingly using India for technology, research, innovation and specialised services. Banks will need to understand these emerging business models and develop suitable financial solutions.
The second day of the PSB Confluence is focusing on agriculture and horticulture value-chain infrastructure, priority-sector lending and the future of the credit-card business. The government expects the discussions to generate practical recommendations that can contribute to the banking reforms process.
The proposed committee will also have to consider the changing nature of banking. Technology is transforming how customers interact with banks, while digital payments, fintech companies and new financial products are increasing competition. Public sector banks, in particular, are under pressure to improve customer experience and remain competitive as private and technology-driven financial institutions expand.
Financial Services Secretary Sanjay Lohia said public sector banks need to maintain their current momentum as competition intensifies. Changing customer expectations, technological developments and new areas of economic activity are forcing banks to rethink traditional business models.
For the government, the broader objective is to ensure that banking reforms support economic expansion without weakening financial stability. The proposed committee is expected to look at the future role of banks in financing India’s growth and could provide a longer-term roadmap for the sector.
The government’s approach comes after a period in which Indian banks dealt with significant bad-loan problems. Stronger asset quality now gives policymakers an opportunity to address structural issues and prepare lenders for a new growth cycle.
