Govt to form high level committee on banking to fund Vikasit Bharath: Nirmala Sitharaman

The government is set to constitute a High-Level Committee on Banking for Viksit Bharat , aimed at creating mega-lenders capable of financing India’s next phase of development, Finance Minister Nirmala Sitharaman announced.

Sitharaman said, “We want the committee to tell us what kind of measures are needed so that banking is made available for funding Viksit Bharat .” On whether the committee would suggest mergers of public sector banks, she added, “One should not narrow it down like that. The goal is to make India’s banking sector big enough to support the financing needs of Viksit Bharat. Achieving this destination requires money, credit, and banking facilities for the common man.”

Sitharaman confirmed that the committee would be formed “at the earliest.” She had first proposed its formation in her Budget speech on February 1 , emphasizing a comprehensive review of the banking sector to align it with India’s growth ambitions while safeguarding financial stability, inclusion, and consumer protection.

In parallel, the Budget also proposed steps to enhance scale and efficiency in public sector non-banking finance companies (NBFCs), including a restructuring of Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) . Both entities play a key role in funding power generation, transmission, and distribution projects.

PFC, a Navratna central public sector enterprise, acquired a majority stake in REC in March 2019, purchasing 103.94 crore shares (52.63% stake) from the government for Rs 14,500 crore . The move consolidated two companies operating in the same sector, strengthening their capacity to support India’s power infrastructure.

Following the Budget announcement, the PFC board has now given in-principle approval for the merger of REC with PFC , signaling the government’s intent to streamline public sector financial institutions for greater efficiency and scale.

The merger will create a larger, stronger, more efficient power sector financier that can fund both big national projects and rural electrification , reduce duplication, and better support India’s energy infrastructure needs.

Sitharaman noted that the ministry concerned had already undertaken significant groundwork and said, “A lot of work has happened. They have come up with this expectation. Let’s see how they play it out.”