Centre sets up High-Level Committee on Banking for Viksit Bharat under Suresh N. Patel
In one line: The Centre has set up a four-member committee under Suresh N. Patel to review India's banking sector for the needs of a developed economy.
Published 30 October 2026. Written by Pratidin from the reports linked at the end; every fact checked by a separate review before publishing. How we work
On 30 October 2026, the Ministry of Finance announced the constitution of the High-Level Committee on Banking for Viksit Bharat, with a tenure of six months. It is chaired by Suresh N. Patel, former Central Vigilance Commissioner. Its members are Shirish Chandra Murmu, Deputy Governor of the Reserve Bank of India (RBI); Padmaja Chundru, former Managing Director and CEO of Indian Bank; and N.S. Vishwanathan, former Deputy Governor of the RBI. The Joint Secretary (Banking) in the Department of Financial Services is Member Secretary. The committee fulfils an announcement in the Union Budget 2026-27, presented on 1 February 2026, when Finance Minister Nirmala Sitharaman said: "I propose setting up a High-Level Committee on Banking for Viksit Bharat to comprehensively review the sector." She described it as a way to align the sector with India's next phase of growth while safeguarding financial stability, inclusion and consumer protection.
The terms of reference are wide. The committee is to assess banking practices and prudential norms against global best practice and propose a roadmap for globally competitive banks; review the regulatory and legal framework for banks, including regional rural banks and cooperative banks, to improve efficiency and ease of doing business; assess the long-term capital needs of banks, development financial institutions and non-banking financial companies (NBFCs) and recommend funding sources to support credit growth; examine differences in the cost of capital for businesses and suggest ways to boost private investment; prepare a roadmap for artificial intelligence and digital innovation in banks with cyber-risk safeguards and talent strategies; and review the Priority Sector Lending (PSL) framework and the Lead Bank Scheme for their relevance and effectiveness. It may also take up any other matter the government assigns.
The review comes when, as the Budget speech put it, banks have strong balance sheets, record profits, better asset quality and outreach to over 98% of villages. Two of its tasks pull in different directions. PSL rules require domestic commercial banks to lend 40% of their adjusted net bank credit to sectors such as agriculture (18%), micro enterprises (7.5%) and weaker sections (12%), and the Lead Bank Scheme, launched by the RBI in December 1969, makes one bank in each district responsible for coordinating credit. These tools serve inclusion; a push for globally competitive banks stresses efficiency, capital and returns. The committee's challenge is to modernise both without weakening either. Its brief on AI and cyber-risk also comes as the Supreme Court presses banks to stop digital frauds.
Prelims facts
- The High-Level Committee on Banking for Viksit Bharat, constituted on 30 October 2026, is chaired by former Central Vigilance Commissioner Suresh N. Patel and has a six-month tenure.
- Its members include RBI Deputy Governor Shirish Chandra Murmu, former RBI Deputy Governor N.S. Vishwanathan and former Indian Bank MD and CEO Padmaja Chundru.
- The committee was announced in the Union Budget 2026-27 on 1 February 2026.
- Its terms of reference include reviewing the Priority Sector Lending framework and the Lead Bank Scheme, and a roadmap for AI in banking.
- Domestic commercial banks must lend 40% of adjusted net bank credit to priority sectors, including 18% to agriculture.
Quick recall
- Who chairs the High-Level Committee on Banking for Viksit Bharat?
- Suresh N. Patel, former Central Vigilance Commissioner.
- Tenure of the committee
- Six months.
- When was the committee announced?
- In the Union Budget 2026-27, presented on 1 February 2026.
- Which serving RBI Deputy Governor is a member?
- Shirish Chandra Murmu.
- Who is the Member Secretary?
- Joint Secretary (Banking), Department of Financial Services.
- Overall PSL target for domestic commercial banks
- 40% of Adjusted Net Bank Credit.
- When did the RBI launch the Lead Bank Scheme?
- December 1969.
- Which committee recommended the district as the unit of credit planning under the Lead Bank Scheme?
- The Nariman Committee (1969), after the Gadgil Study Group.
Prelims practice question
With reference to the Priority Sector Lending (PSL) norms for domestic scheduled commercial banks, consider the following statements:
1. The overall PSL target is 40% of Adjusted Net Bank Credit (ANBC).
2. The sub-target for agriculture is 18% of ANBC.
3. The overall PSL target for Regional Rural Banks is lower than that for domestic commercial banks.
Which of the statements given above are correct?
- 1 and 2 only
- 2 and 3 only
- 1 and 3 only
- 1, 2 and 3
Show answer
Answer: (a) 1 and 2 only. Statements 1 and 2 are correct. Statement 3 is incorrect: Regional Rural Banks have a higher overall PSL target of 75% of ANBC, and Small Finance Banks 60%.
Use this in UPSC Mains: previous-year questions
Recurring theme: Banking sector reform, credit for growth and financial inclusion
- How to use this
Show that a market-led banking system still relies on directed tools for inclusion, and that the new committee must reconcile competitiveness with them.
- Domestic commercial banks must lend 40% of ANBC to priority sectors, including 18% to agriculture and 7.5% to micro enterprises.
- The Lead Bank Scheme, launched in December 1969, makes one bank responsible for district credit planning.
- The 2026 High-Level Committee on Banking must review both while proposing a roadmap for globally competitive banks.
- How to use this
Open with India's banking outreach and note that the government is now reviewing the tools that delivered it.
- The Budget 2026-27 noted banking outreach to over 98% of villages.
- A committee under Suresh N. Patel, constituted on 30 October 2026, will review Priority Sector Lending and the Lead Bank Scheme within six months.
Business correspondents are part of the branchless outreach that the Lead Bank Scheme and inclusion policy rely on.
Mains practice question
The High-Level Committee on Banking for Viksit Bharat has been asked both to make Indian banks globally competitive and to review priority sector lending. Discuss the reforms India's banking sector needs to finance growth while staying inclusive. (250 words)
Model answer
On 30 October 2026, the Centre constituted the High-Level Committee on Banking for Viksit Bharat under Suresh N. Patel, with six months to review the sector, as announced in the Union Budget 2026-27.
Why a review now
- Strong base: banks report strong balance sheets, record profits and outreach to over 98% of villages (Budget 2026-27).
- Growth needs capital: long-term credit for infrastructure and industry needs deeper funding for banks, NBFCs and development financial institutions.
- New risks: AI, digital banking and cyber fraud.
Reforms for competitiveness
- Prudential norms: align with global best practice while keeping stability.
- Capital: assess long-term capital needs and new funding sources for credit growth.
- Cost of capital: narrow differences in borrowing costs to revive private investment.
- Regulatory simplification: for commercial, regional rural and cooperative banks.
- Technology: AI roadmap with cyber-risk safeguards and skilled staff.
Keeping it inclusive
- Priority Sector Lending: 40% of ANBC for domestic banks, with 18% for agriculture and 7.5% for micro enterprises; review to target credit gaps better.
- Lead Bank Scheme (1969): refresh district credit planning.
- Consumer protection: stronger defences against digital fraud.
Risks to manage
- Chasing scale and returns may crowd out small borrowers.
- Diluting directed lending without alternatives could hurt farmers and MSMEs.
- Six months is short for a sector-wide review.
The committee's test is to build banks that can finance a developed India without leaving behind the borrowers that inclusion policies were designed to reach.
The basics
Why this matters
Banks turn savings into loans. How well they do it decides whether farmers get seed money, whether factories can expand and whether roads get built. India's banks are in better health than they have been in years, and the government now wants a full review of what they must become for a developed economy by 2047.
- 1Suresh N. PatelChairperson; former Central Vigilance Commissioner
- 2Shirish Chandra MurmuMember; Deputy Governor, RBI
- 3N.S. VishwanathanMember; former Deputy Governor, RBI
- 4Padmaja ChundruMember; former MD and CEO, Indian Bank
- 5Joint Secretary (Banking), DFSMember Secretary
Two goals that pull apart
The committee is asked to make banks globally competitive. It is also asked to review the tools that make banks lend where they might not by choice: Priority Sector Lending and the Lead Bank Scheme. Directed lending supports inclusion but can lower returns; competitiveness rewards scale and efficiency.
- Global best-practice prudential norms
- Long-term capital for banks, DFIs and NBFCs
- AI roadmap and cyber-risk safeguards
- Lower cost of capital for business
- Priority Sector Lending framework
- Lead Bank Scheme and district credit plans
- Regional rural and cooperative banks
- Consumer protection
Priority sector targets
Domestic commercial banks must lend 40% of their Adjusted Net Bank Credit to priority sectors. Banks that fall short can buy Priority Sector Lending Certificates from banks with a surplus.
Where long-term money comes from
Big projects need loans for 15 or 20 years, while bank deposits are mostly short term. That mismatch is why the brief also covers Development financial institutions and NBFCs, which can specialise in long-term lending.
Go deeper
Why it matters for UPSC
Banking reform is core GS3 material, and the committee's brief touches financial inclusion, credit for growth, regulation and technology. Prelims can ask about members, PSL targets and the Lead Bank Scheme.
The core idea
The committee must reconcile two goals. One is competitiveness: global prudential norms, capital and AI. The other is inclusion through Priority Sector Lending, measured against Adjusted Net Bank Credit, and district credit planning under the Lead Bank Scheme. It must also look at how Development financial institutions and NBFCs can supply long-term credit.
Numbers and dates to remember
- 1 February 2026: Budget 2026-27 announces the committee.
- 30 October 2026: committee constituted; tenure six months.
- Members: Suresh N. Patel (chair), Shirish Chandra Murmu, N.S. Vishwanathan, Padmaja Chundru.
- 40%: PSL target for domestic commercial banks; 75% for RRBs and 60% for Small Finance Banks.
- December 1969: Lead Bank Scheme launched.
- Over 98% of villages: banking outreach cited in the Budget.
Where to go next
- Priority Sector Lending: the rules that direct a share of credit to chosen sectors.
- Adjusted Net Bank Credit: the base on which PSL targets are calculated.
- Lead Bank Scheme: the district-level credit coordination system.
- Development financial institutions: lenders built for long-term finance.
Go deeper: Directed lending versus competitive banking
The case for keeping directed lending. Priority Sector Lending guarantees that 18% of Adjusted Net Bank Credit reaches agriculture and 7.5% reaches micro enterprises, segments that markets tend to underserve. The Lead Bank Scheme grew from the Gadgil Study Group's finding that commercial banks then covered only about 5,000 villages and about 1% of institutional farm credit. Outreach to over 98% of villages today shows what such tools achieved.
The case for change. Critics argue that targets set as fixed shares can push banks to meet numbers rather than serve need, and tradeable Priority Sector Lending Certificates let banks that fall short buy compliance instead of lending. A competitive banking system, the argument goes, needs capital, efficiency and global prudential norms, and long-term infrastructure credit may be better handled by Development financial institutions than by deposit-funded banks.
What to watch. Whether the committee recommends recalibrating PSL categories and targets, revamping district credit planning, a larger role for DFIs and NBFCs, and an AI roadmap with cyber-risk safeguards.
Priority Sector Lending
The rules that direct a share of credit to chosen sectors.
In one line: Priority Sector Lending (PSL) norms require banks to lend a set share of their credit to sectors that matter for development but may not get enough credit otherwise.
The targets
For domestic commercial banks and large foreign banks (20 or more branches), the overall target is 40% of Adjusted Net Bank Credit. Sub-targets include agriculture 18%, small and marginal farmers 10%, micro enterprises 7.5% and weaker sections 12%. Regional Rural Banks have a 75% overall target; Small Finance Banks and urban cooperative banks 60%. The current directions took effect from 1 April 2025.
Trading shortfalls
Banks that overshoot can sell Priority Sector Lending Certificates (PSLCs) in four types (agriculture, small and marginal farmers, micro enterprises, general) to banks that fall short.
Why it is in the news
The new banking committee must review whether the framework remains relevant and effective.
Where to go next
Adjusted Net Bank Credit
The base on which PSL targets are calculated.
In one line: Adjusted Net Bank Credit (ANBC) is the measure of a bank's lending that the RBI uses as the base for priority sector targets.
Why a special base
A bank's total loans include items that are not ordinary lending to the economy, and some of its holdings, such as certain bonds, behave like loans. The RBI therefore adjusts net bank credit by adding and subtracting specified items to get a fair base, so that a 40% target means the same thing across banks.
How it is used
Every PSL target is a percentage of ANBC (or of credit equivalent of off-balance sheet exposure, whichever is higher). So when a bank grows its loan book, its priority sector obligation grows too.
Why it is in the news
Any change the banking committee proposes to PSL will be expressed against this base.
Where to go next
Lead Bank Scheme
The district-level credit coordination system.
In one line: Under the Lead Bank Scheme, one bank in each district leads and coordinates the work of all banks there to meet local credit needs.
Origin
In October 1968 the National Credit Council set up a study group under Prof. D.R. Gadgil, which found that commercial banks covered only about 5,000 villages and recommended an area approach to credit. The Nariman Committee (1969) recommended making the district the basic unit of banking and credit planning, with a designated lead bank. The RBI launched the scheme in December 1969.
How it works
The lead bank acts as a consortium leader, not a monopoly. District forums chaired by the District Collector review credit plans, and State Level Bankers' Committees, constituted in 1977, handle State-level issues.
Why it is in the news
The new committee must assess the scheme's relevance and coordination.
Where to go next
Development financial institutions
Lenders built for long-term finance.
In one line: Development financial institutions (DFIs) are lenders set up to provide long-term finance for infrastructure, industry and other sectors that commercial banks find too risky or too long-dated.
Why they matter
Banks fund most of their loans from deposits that savers can withdraw at short notice. Lending that money for 15 or 20 years creates an asset-liability mismatch. DFIs raise long-term funds, from bonds or the government, and can match them with long-term projects. NABARD, SIDBI and NaBFID (the National Bank for Financing Infrastructure and Development) are examples.
Why it is in the news
The banking committee must assess the long-term capital needs of banks, including DFIs and NBFCs, and recommend funding sources. The Budget 2026-27 also announced restructuring of the Power Finance Corporation and the Rural Electrification Corporation as a first step in NBFC reform.
Where to go next
Take the 30 October 2026 quiz: 30 Prelims-style questions with answers