Banks, NBFCs & Insurers Brace For Budget 2026: 7 Game-Changing Moves The Street Is Watching

The financial services industry is seeking specific, effective policy interventions rather than broad reforms as the Union Budget 2026 draws near. The challenging operating environment that banking, NBFCs, and insurance companies have to face is characterized by issues with deposit mobilization, uneven credit growth, stress on MSMEs as a result of global tariff uncertainty, and growing asset quality risks in specific categories. Against this context, Budget 2026 is likely to play a vital role in minimising liquidity strains, boosting credit flow, and enhancing risk absorption across the financial ecosystem.

As per Mr. Siddarth Bhamre, Head of Institutional Research, Asit C Mehta Investment Interrmediates Limited, below are the Budget expectations across Banking, NBFCs and Insurance sectors.

Banks and NBFCs

Tax incentives on deposits - Moderation in TDS on Bank's Deposits

• Since banks are facing challenges in mobilizing deposits, the reduction of TDS on interest on savings/term deposits would help in CASA deposits mobilization and would incentivize account holders to maintain higher balances in their respective bank accounts.

Credit guarantee scheme for MFIs

• Including the current MFI credit under the credit guarantee scheme (for example, Credit Guarantee Fund for Micro Units (CGFMU) scheme) would help the MFI-NBFC companies recover from the MFI NPAs. Also, it would improve funding and ease liquidity pressure.

Protect MSMEs from tariff-related headwinds

• Making funds more accessible for MSME lenders would protect the lenders from mitigating tariff-related headwinds.

Increase in allocation under PMAY

• Higher allocation under housing schemes such as PMAY would be beneficial for housing NBFCs and affordable housing financing companies, and it would increase the lending volumes.

Lowering limit for SARFAESI Act

• Lowering the limit of recovery of loans under the SARFAESI Act would help in faster recovery of retail-based loans and improve credit quality. Currently, the limit under the ACT is Rs 20 lakhs; lowering it to Rs 5 lakhs would facilitate faster recovery to stage-3 credit.

Life Insurance

Imposition of composite license

• Implementation of a composite license would help insurance companies to increase the scope of premiums and value additions in the existing premium policies, thus increasing the ticket size.

Including the deduction of insurance premiums under the new tax scheme

• Inclusion of insurance premiums/retirement products deduction under the new tax regime would provide tax benefit to the policyholders and encourage purchase of such policies by the retail customers.

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