Ahead of the Union Budget 2026–27, India’s banking sector and non-bank financial companies (NBFCs) are pressing for deeper policy changes to address growing pressures on deposits, funding costs and the persistent credit shortfall for micro, small and medium enterprises (MSMEs), even as overall credit demand remains robust. Finance Minister Nirmala Sitharaman is scheduled to present the budget on February 1, 2026.
Key Highlights
- Banks urge structural reforms in Budget to address slowing deposit growth and rising funding pressures.
- NBFCs seek targeted measures to bridge MSME credit gaps and ensure sustainable long-term financing.
Industry leaders note that deposit growth has not kept pace with credit expansion, forcing lenders to raise deposit rates and compress their net interest margins (NIMs). Experts say the Budget should recognise a structural shift in household savings away from traditional bank deposits and offer targeted incentives to reverse this trend.
To bridge the deposit gap, banks have proposed measures such as tax deductions on incremental term deposits or rollovers, TDS exemptions on bank interest up to ₹50,000 for retail customers, and waivers of TDS for non-individual borrowers. They have also sought a long-term repo facility for banks and changes to the SARFAESI Act’s threshold to strengthen recovery mechanisms for lenders.
Also Read: Banks & NBFCs Seek Budget 2026 Relief on Credit Flow
At the same time, NBFCs that finance MSMEs are requesting structural interventions to close the significant credit gap faced by the sector, which contributes more than 30% to India’s GDP. Industry voices want lower cost of capital, improved liquidity access, and better risk-sharing frameworks — including a possible dedicated NBFC–MSME category and a predictable refinance window — to ensure lending continues through economic cycles.
Support for technology adoption, digital solutions and a government-backed credit guarantee scheme for microfinance institutions have also been highlighted as priorities that would enhance risk appetite and sustain credit flow to underserved borrowers.
