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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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