Banks, NBFCs eye Budget 2026 relief on credit flow, taxes and compliance

India’s Union Budget 2026 is expected to bring transformative changes in the country’s banking and financial services. The banking sector of India has mainly remained safe through strengthened balance sheets and increased credit flow. However, the non-banking financial companies (NBFCs), capital markets and digital payments are on the edge due to improper policies of taxation, TDS, STT, cash-flow constraints and more. NBFCs and BFSI leaders have urged the Finance Ministry of the country to introduce policies to encourage long-term investment, household participation in cash equity trade, less TDS compliance with and a refinancing window for higher liquidity and credit-flow 

As per the report by Moneycontrol, BFSI leaders have urged Nirmala Sitharaman, the Finance Minister of India, to introduce policies dedicated to the growth of non-banking financial services of the country, too. They have sought to strengthen the structure of digital payments and NBFCs. The major changes demanded include regulatory changes, revised taxation policies, and funding the NBFCs. The aim of the industry leaders behind these changes is to increase long-term investments, fund MSMEs, and encourage household participation in equity trade. 

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Regulatory Changes

The BFSI has urged that the Union Budget 2026 should align the regulatory policies for the NBFCs with the Bank. As per Moneycontrol, the major demand under this section is to reduce the SARFAESI thresholds from INR 20 lakhs to INR 1 lakh. This will improve the competition with the bank-led financial services. 

Besides, the leaders have sought to exempt NBFCs from TDS-related costs in the loans repaid to them. These changes have been demanded by keeping in mind the increased compliance cost and cash-flow constraints. 

Taxation Revision 

According to the report of Moneycontrol, financial industry leaders of India are expecting the Union Budget 2026 to rationalise the capital market taxation policies. They have sought to decrease the STT on cash equity trades compared to the derivatives. This is expected to encourage long-term investment over speculation. 

In addition to this, the leaders expect the budget to introduce policies to change the taxation structure of buybacks and dividends. They have recommended a fundamental change in the taxation policies of share buybacks. According to Moneycontrol, BFSI has sought to apply taxes only on the profit portions of share buybacks. It has also been recommended to align the dividend tax of the domestic investments with that of the NRIs. 

Funding

The BFSI has recommended a refinancing window for the NBFCs so that they can support the MSMEs and retail borrowers. This will also increase the liquidity and credit flow of the NBFCs, comparable to the bank-led financial services. 

Other Demands/Recommendations

Smoothening Digital Payments

BFSI is seeking policies from the Union Budget 2026 to remove the bottlenecks in the structure and framework of digital money transactions. According to a Moneycontrol report, the leaders have recommended clarity in subsidy structures as crucial to the sustainable growth of UPI-led transactions. 

Increased Household Participation in Equity Trades

The capital market participants are seeking household or family participation in equity trades. They have recommended an increase from 5% to 8% in household equity exposure, as reported by Moneycontrol.