"With Indian banks showing record profitability and improved asset quality, the time is ripe for second-generation banking reforms." Discuss in the context of the High Level Committee on Banking for Viksit Bharat.

The Union Budget 2026-27 announced a High Level Committee (HLC) on Banking for Viksit Bharat. It gave four reasons: strong balance sheets, record profitability, better asset quality and banking coverage of over 98% of villages [2]. First-generation reforms were about access and cleaning up bad loans. The HLC's terms of reference point to a second stage, focused on competitiveness, long-term capital and the quality of credit [1].

Why the time is ripe

• Reform from strength: earlier reforms came out of crises, such as the Rs 2.11 lakh crore PSB recapitalisation of 2017 [3]. Healthy books now allow structural change without fire-fighting.
• Financing growth: the HLC will assess the long-term capital needs of Banks, DFIs and NBFCs. It will also look at cost-of-capital gaps that hold back private investment [1].
• Global competitiveness: it will adapt global prudential best practices to Indian conditions [1].
• Technology: it will draw up an AI and digital roadmap with cyber-risk safeguards and a talent strategy [1].

Second-generation agenda: from access to quality

• Cooperatives and RRBs: the Banking Regulation (Amendment) Act, 2020 widened RBI's powers. However, RBI must still consult state governments before superseding a cooperative bank's board [4]. The HLC's legal review can end this dual control.
• PSL and Lead Bank Scheme: banks reach only 41% of small and marginal farmers, and RBI's working group found farm credit being used for non-farm purposes [5]. The HLC should first evaluate RBI's 2021 incentive framework, which rewards lending in low-credit districts [6], before it sets new targets.

Caveats

• Strength was costly: today's healthy books followed a recapitalisation funded by taxpayers [3]. Reform must stop the next bad-loan cycle from landing on them again.
• Regulatory overlap: the panel is led by DFS, whose Joint Secretary is its Member Secretary [1]. Several of its areas fall under RBI's rule-making, which risks blurring accountability [4].
• Tight timeline: it has a six-month tenure to cover six broad terms of reference [1].
• Guardrails: financial stability, inclusion and consumer protection must not be traded away for scale [2].

Today's strength gives India a rare chance to reform before a crisis forces it to. The HLC should split its report into legislative changes for Parliament and advisory inputs for RBI. It should also measure success by whether credit reaches last-mile borrowers. If it does both, it can build a globally competitive, inclusive and resilient banking system for Viksit Bharat@2047, in line with SDG 8.10 on access to financial services.