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Banking Reforms for Viksit Bharat: ICRA Calls for Ownership, Voting Rights Revamp

Credit rating agency ICRA has urged the newly announced High Level Committee on Banking for Viksit Bharat to tackle critical issues like ownership structure and promoter voting rights, which it says are dampening private sector participation. The committee was announced by Finance Minister Nirmala Sitharaman to comprehensively review the banking sector for stability and inclusion. The Union Budget also proposed restructuring Power Finance Corporation and Rural Electrification Corporation to create scale and improve efficiency among public sector NBFCs. Officials state this consolidation will enhance capital strength, allowing for greater borrowing and financing of more infrastructure and energy projects.

Key Points: Banking Reforms: ICRA on Ownership, Voting Rights for Viksit Bharat

  • Address promoter ownership structure
  • Review promoter voting rights
  • Boost private & foreign investment
  • Restructure PFC and REC for scale
2 min read

Committee on Banking for Viksit Bharat should address ownership structure, promoter voting rights: ICRA

ICRA says Banking for Viksit Bharat committee must address promoter ownership, voting rights to boost private investment. Analysis of PFC-REC merger.

"consolidation would enhance capital strength, enabling the merged entity to borrow more - M Nagaraju"

New Delhi, February 2

The High Level Committee on Banking for Viksit Bharat, announced by the Union Finance Minister Nirmala Sitharaman during the Budget 2026 speech, should address some key matters such as ownership structure and voting rights of promoters, said credit rating agency ICRA on Monday.

The committee should address some matters such as ownership structure and voting rights of promoters as these continue to dampen private sector and foreign investor participation, ICRA said in its report.

The banking sector has undergone significant consolidation since the merger among public sector banks in 2020 while bank privatisation has not seen material progress, it highlighted.

Finance Minister had said, the High Level Committee on Banking for Viksit Bharat will comprehensively review the banking sector and to safeguarding financial stability, inclusion and consumer protection.

Further, the Union Budget also proposed to restructure the Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) to achieve scale and improve efficiency in the Public Sector NBFCs. The vision for NBFCs for Viksit Bharat has been outlined with clear targets for credit disbursement and technology adoption.

ICRA said the proposed restructuring of PFC and REC seems like an attempt to clearly define target segments, enhance segment diversity (Green financing, etc) and consequently strengthen credit flow to the infrastructure sector.

In a post-Budget conversation with ANI, M Nagaraju, Secretary, Department of Financial Services (DFS), on Sunday said the consolidation would enhance capital strength, enabling the merged entity to borrow more and extend financing to a larger number of projects.

"Both Rural Electrification Corporation (REC) and Power Finance Corporation (PFC) provide project financing to the public and private sectors in energy. If two NBFCs are financing the same projects in the same sector, it makes rational sense to examine a merger," Nagaraju said.

He added that consolidation would enhance capital strength, enabling the merged entity to borrow more and extend financing to a larger number of projects. "With a stronger balance sheet, they will be able to lend more and support infrastructure and energy projects more effectively," Nagaraju said.

- ANI

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Reader Comments

P
Priya S
Merging PFC and REC makes perfect sense. Why have two NBFCs doing the same job? It will reduce overheads and create a stronger institution for financing our energy transition. Hope this leads to faster project approvals and more green financing.
A
Aditya G
While the intent is good, I'm skeptical. We've seen committees before. The real issue is execution. Will this committee's recommendations actually be implemented, or will they gather dust like so many others? The banking sector needs action, not just another review.
S
Sarah B
As someone working in finance, the focus on technology adoption for NBFCs is crucial. Digital lending and better risk assessment can drive inclusion. But consumer protection must be the top priority to prevent another microfinance-like crisis.
K
Karthik V
The mention of 'Viksit Bharat' in banking is promising. But development must be balanced. We need strong banks that fund infrastructure, but also ensure credit reaches small farmers and MSMEs in tier 2/3 cities. Financial inclusion is key for true development.
M
Meera T
Good step. Consolidation among PSBs helped, now it's time for NBFCs. A stronger merged PFC-REC entity can better support our renewable energy goals. Hope they also simplify the loan process for smaller solar and wind projects. ☀️💨

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