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Budget 2026's Financial Reforms to Spur Private Investment in Infrastructure

A report by Union Bank of India states that the financial sector announcements in the Union Budget 2026 are designed to boost private investment and speed up infrastructure development. Key measures include forming a High-Level Committee on Banking for Viksit Bharat and creating an Infrastructure Risk Guarantee Fund to reduce lender risk. The budget also outlines reforms for NBFCs and restructuring for power sector financiers to improve credit flow and support energy transition. Overall, these steps aim to strengthen the banking system's resilience and align it with India's long-term growth goals.

Key Points: Budget 2026 Financial Reforms to Boost Private Investment

  • Reduces credit risk for early-stage projects
  • Establishes High-Level Committee on Banking for Viksit Bharat
  • Creates Infrastructure Risk Guarantee Fund
  • Sets new targets for NBFCs
  • Restructures power sector financiers
3 min read

Financial sector measures in Budget 2026 to spur private investment: UBI Report

Union Bank report says Budget 2026 measures will reduce lender risk, crowd in private investment, and accelerate infrastructure execution.

"budget will help in strengthening lender confidence by reducing perceived credit risk in early-stage infra projects - Union Bank of India Report"

New Delhi, February 2

The announcements made in the Union Budget 2026 for the financial sector are expected to play a crucial role in crowding in private investment and accelerating infrastructure execution, according to a report by Union Bank of India.

The report highlighted that the reforms announced in the Budget will help strengthen lender confidence, particularly by reducing perceived credit risk in early-stage infrastructure projects.

This improvement in risk perception is expected to encourage greater private sector participation and support faster execution of infrastructure projects across the country.

It stated that "budget will help in strengthening lender confidence by reducing perceived credit risk in early-stage infra projects. Helps crowd-in private investment and accelerates infrastructure execution".

The key announcement highlighted in the budget 2026 is the setting up of a High-Level Committee on Banking for Viksit Bharat.

The committee is expected to work towards aligning India's banking architecture with the next phase of economic growth, keeping in view evolving financing needs and global best practices.

The Budget measures also aim to enable long-term structural reforms in the financial system. The report added that these reforms are expected to improve governance standards, strengthen the resilience of the banking sector, and prepare lenders for meeting high-growth credit demand in the coming years.

The overall focus is on creating a robust and forward-looking financial architecture aligned with India's long-term growth aspirations.

In the power sector, the report noted that the Budget initiatives will improve efficiency and capital allocation in power-sector financing.

This, in turn, will strengthen the ability of financial institutions to fund renewable energy and transmission projects, which are critical for meeting India's energy transition goals.

As part of this effort, the government has announced the restructuring of Power Finance Corporation and Rural Electrification Corporation, with the objective of enhancing their effectiveness in financing power infrastructure.

The Budget outlined new targets for non-banking financial companies (NBFCs), focusing on credit expansion and technology adoption.

These measures are expected to improve credit penetration in underserved segments, accelerate digitisation in NBFC operations, and enhance overall financial inclusion.

In addition, the government has announced the creation of an Infrastructure Risk Guarantee Fund. The fund will provide prudently calibrated partial credit guarantees to lenders during the development and construction phase of infrastructure projects.

According to the report, this step is expected to further reduce risk for lenders and encourage greater private investment in infrastructure.

Overall, the report by Union Bank of India noted that the Budget's financial sector measures are aimed at strengthening confidence, improving capital allocation, and supporting sustainable economic growth.

- ANI

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Reader Comments

P
Priya S
Good to see focus on NBFCs and credit expansion in underserved segments. Hopefully, this means easier loans for small businesses in tier-2 and tier-3 cities. The real test will be execution on the ground. The committee for Viksit Bharat sounds promising, but we need clear timelines.
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Rohit P
Restructuring PFC and REC is long overdue. The power sector is a mess of delayed payments and inefficiencies. If this improves capital allocation and helps fund more renewable projects, it's a win for everyone. Less power cuts, more green energy! 🌞
S
Sarah B
As someone working in project finance, reducing perceived credit risk is the key. Banks have been overly cautious. A calibrated guarantee fund could unlock billions. The report is optimistic, but the devil is in the details of how this committee operates and who sets the guarantee terms.
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Karthik V
All these reports sound great on paper. My respectful criticism is that we hear about "strengthening confidence" and "structural reforms" every budget. What we need to see is actual, faster project completion. Will this committee have real power to cut red tape? That's the billion-dollar question.
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Nisha Z
Focusing on technology adoption in NBFCs is crucial for financial inclusion. In my village, people still rely on local moneylenders because banking is so cumbersome. If digitisation makes loans faster and simpler for farmers and small vendors, that's a big achievement.

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