High Level Committee on Banking for Viksit Bharat: Mandate and Reforms Explained for UPSC

In short: The Government constituted the High Level Committee on Banking for Viksit Bharat on 30 October 2026, chaired by former Central Vigilance Commissioner Suresh N. Patel, to review India’s banking sector and recommend structural, regulatory and legislative reforms within six months. It is the first broad review of the banking system since the Narasimham Committees of the 1990s, and its terms of reference touch almost every GS Paper 3 banking theme: prudential norms, capital, cooperative banks, digital risk and priority sector lending.

Syllabus: GS Paper 3: Indian economy and issues relating to mobilisation of resources, growth and development; inclusive growth · Source: PIB (Ministry of Finance) · 30 October 2026

Why is it in the news?

The Finance Minister had announced the committee in the Union Budget 2026-27. On 30 October 2026, the Ministry of Finance notified its composition: Suresh N. Patel, former Central Vigilance Commissioner, as Chairman, with Shirish Chandra Murmu (Deputy Governor, RBI), Padmaja Chunduru (former MD and CEO, Indian Bank) and N.S. Vishwanathan (former Deputy Governor, RBI) as members. The Joint Secretary (Banking) of the Department of Financial Services is the Member Secretary. Its stated aim is a banking sector that is globally competitive, financially inclusive and resilient by 2047.

What will the committee examine?

Economic dimension: financing a developed economy

• A country aiming for high-income status by 2047 needs a much larger credit base; India’s bank credit relative to GDP is still well below that of East Asian economies at a similar stage of growth.
• Only one Indian bank, the State Bank of India, is regularly counted among the world’s large banks by assets, which limits the system’s ability to fund very large infrastructure and industrial projects.
• Long-term infrastructure finance has largely been carried by banks since the old DFIs (such as ICICI and IDBI) became commercial banks; the National Bank for Financing Infrastructure and Development (NaBFID, 2021) was set up to fill part of this gap.
• A high cost of capital discourages private investment, which is why the terms of reference single it out.

Governance and regulatory dimension

• Banks are governed by the Banking Regulation Act, 1949; RRBs by the Regional Rural Banks Act, 1976; and public sector banks by the Bank Nationalisation Acts of 1970 and 1980.
• Cooperative banks long faced “dual control” by the RBI and State Registrars of Cooperative Societies; the Banking Regulation (Amendment) Act, 2020 strengthened RBI supervision, but frauds such as the PMC Bank case showed the weakness of the old model.
• Choosing a former Central Vigilance Commissioner as Chairman signals attention to governance, fraud and accountability, alongside growth.

Social dimension: inclusion

Priority Sector Lending (PSL) requires domestic scheduled commercial banks to lend 40% of adjusted net bank credit to sectors such as agriculture, micro and small enterprises, education, housing and weaker sections. The Lead Bank Scheme, started in 1969, assigns a bank to coordinate credit in each district. Both have helped spread banking, but critics say PSL targets are often met through low-risk proxies, such as buying Priority Sector Lending Certificates, rather than new lending to small borrowers. The committee’s review could make these tools more data-driven.

Technological dimension

Indian banking now runs largely on digital rails such as UPI, Aadhaar-based e-KYC and Account Aggregators. This has cut costs but raised new risks: cyber fraud, mule accounts used to launder scam money, and concentration of operational risk in technology vendors. The committee is asked to recommend a roadmap for AI in banking along with cyber safeguards, and a plan to build the skills banks will need.

Critical Analysis

The committee has a broad mandate and a short tenure, which may push it towards principles rather than detailed legal drafting. Its composition draws heavily on regulators and public sector banking, with no member from private banks, fintech firms or academic economics, which could narrow the range of views. Questions such as further consolidation or privatisation of public sector banks, which affect jobs and political economy, are not named in the terms of reference. Supporters respond that a focused, experienced panel can move faster, and that the RBI’s presence will keep recommendations practical and consistent with financial stability.

Way Forward

• Hold open consultations with private banks, fintechs, cooperative banks, depositors and States before finalising recommendations.
• Set a clear path for strengthening the capital and governance of public sector banks, including board independence.
• Simplify the regulatory framework for cooperative banks and RRBs so that they can use technology without weakening supervision.
• Use data from credit bureaus and GST filings to make PSL and the Lead Bank Scheme target real credit gaps.
• Pair AI adoption with strong rules on model risk, data protection and customer grievance redress.

A modern, well-capitalised and trusted banking system is a precondition for Viksit Bharat. The committee’s value will depend on whether its recommendations are turned into laws and regulations, as the Narasimham reports were in the 1990s.