Budget 2026 expectations: What banks and financial services want from the FM this time?

Union Budget 2026: Budget 2026 season is here and the banking sector heading ahead with a list of expectations, looking for targeted policy support to address credit constraints, employment pressures and regulatory challenges. According to Balasubramanian A, senior vice president at TeamLease Services, BFSI played a role in expanding formal employment in 2025, driven largely by large banks and fintech platforms. Lending growth remained in the mid-to-high single digits during the year. However, he further flagged that emerging asset-quality concerns, particularly in unsecured personal loans and auto loans, where non-performing assets are on the rise. This trend, he noted, reflects weak overall economic growth and the impact of earlier interest rate hikes. Hiring within the sector has been largely concentrated in customer-facing roles such as retail banking, along with back-office operations and compliance functions. “High-skill roles in investment banking and wealth management are limited. Employment is formally structured, but wage growth has lagged inflation, compressing real wages for junior staff,” the expert told TOI. Credit availability continues to be a key challenge. Despite existing government schemes, MSMEs remain largely credit-starved, with SME lending growing at a slow pace. Housing finance has held up well, and insurance penetration is increasing in semi-urban and rural areas. However, these positives conceal a broader sense of caution in bank lending decisions.From the incoming Union Budget, the sector is seeking enhanced credit guarantee mechanisms for MSMEs “with higher coverage, longer tenors, and simplified KYC norms for small loans,” Balasubramanian said. To improve access for MSMEs, there should deply co-lending schemes where the government shares risks. Additionally, the industry is also seeking continued support for digital financial inclusion, including backing for UPI, BHIM and digital lending platforms, along with the introduction of a “FinTech Bill clarifying regulatory sandboxes”.Incentives to boost pension and insurance adoption are another priority, with calls for matching government contributions for NPS enrolments to strengthen the savings base and retirement security. Additionally, the sector wants regulatory relief for regional rural banks and small finance banks, including tax breaks and a reduced compliance burden, to improve profitability and expand the flow of credit to rural areas.