India's bold banking reforms aim to reshape its financial future by 2047
India's government is pushing ahead with major reforms in its banking and financial sectors. The changes aim to strengthen the country's financial system as part of the Viksit Bharat vision—a plan to transform India into a developed nation by 2047. Recent announcements include mergers, new committees, and a renewed focus on creating globally competitive lenders.
The latest moves began with the Union Budget on 1 February 2023. Finance Minister Nirmala Sitharaman proposed restructuring two key public sector lenders: Power Finance Corporation (PFC) and Rural Electrification Corporation (REC). The goal was to improve efficiency and scale in state-backed financial firms.
Last week, PFC's board approved a merger with REC in principle. This follows an earlier consolidation in March 2019, when PFC took a majority stake in REC by paying the government ₹14,500 crore. Both companies already operated in similar areas, making the merger a logical step.
Alongside this, the Budget announced a high-level committee to recommend broader banking reforms. Headed by former RBI Governor Raghuram Rajan, the panel includes financial experts like Uday Kotak, KV Kamath, and Lalit Kumar. Their task is to align the banking sector with India's long-term growth while ensuring financial stability, inclusion, and consumer protection. Sitharaman stressed the need for speed, stating, 'We will do it at the earliest.'
The committee's mandate covers key areas: reviewing sector reforms, boosting financial inclusion, and strengthening risk management. Its recommendations will help shape India's financial system as the country works toward its 2047 development targets.
The proposed merger of PFC and REC is now moving forward, with regulatory approvals still pending. Meanwhile, the Rajan-led committee will submit its findings in the coming months. If implemented, these reforms could reshape India's banking landscape, making it more robust and competitive on the global stage.
