Union Budget 2026: Impact on BFSI - Leveraged & Non-Leveraged Financials with Recommendations
By Prime Research | Updated at: Feb 2, 2026 10:57 PM IST
BFSI | Leveraged Financials
| Budget Highlights | Impact | Recommendations |
|---|---|---|
| Capex outlay (including IEBR) increased from INR 13.7trn (FY26BE) to INR 15.3trn (FY27BE) (11.6% YoY). ~65% of the capex is directed towards three key sectors: Defence (17%), Roads (25%), and Railways (24%). | Large allocation towards key sectors such as Defence, Roads, and Power have a multiplier effect for lending institutions, especially corporate‑facing institutions financing large projects as well as suppliers. | Positive growth catalyst for corporate‑facing lenders such as SBIN, ICICIIBC, and other PSU banks. |
| To set up a high‑level committee on “Banking for Viksit Bharat” to comprehensively review the sector and align it with India’s next phase of growth, while safeguarding financial stability, inclusion, and consumer protection. | Likely to align banking sector reforms, especially around resource mobilization, customer centricity, and financial inclusion. | Growth catalyst for banking sector. |
| Provision for credit guarantee scheme cover for MSEs (GECL) at INR 90bn for FY27BE vs. INR 90bn for FY26BE (FY26RE: Nil). | Likely to enhance lending to MSMEs by banks and NBFCs owing to lower counterparty risk and higher guarantee, although no allocation so far during FY26. | Growth catalyst for large and mid‑sized MSME lenders. |
| Proposal for Infrastructure Risk Guarantee Fund to provide partial credit guarantee for private developers during infrastructure development and construction phase. Provision of INR 10bn for FY27BE. | Likely to enhance lending for construction finance and infrastructure projects by Banks and NBFCs/HFCs owing to lower counterparty risk and partial credit guarantee. | Growth catalyst for large banks such as SBIN, ICICIIBC and HFCs such as PNBHOUSING, LICHFI, etc. |
| Other miscellaneous capital receipts for FY27BE increased to INR 80bn (vs. INR 34bn for FY26RE). | Likely divestment proceeds from sale of PSU or quasi‑PSU assets. | Positive for IDBI Bank. |
| PMAY-G: Provision for FY27BE largely flat at INR 549bn vs. INR 548bn for FY26BE (FY26RE: INR 325bn). | While expenditure in FY26RE is lower, sharp increase in provisions for FY27BE is positive for lenders in affordable housing space in rural segment. | Positive for affordable-focused HFCs in rural segment such as APTUS, etc. |
| PMAY-U: Provision for FY27BE decreased to INR 80bn for interest subsidy scheme (EWS, LIG and MIG segments) vs. INR 358bn for FY26BE (FY26RE: INR 3bn); provisions for PMAY-U decreased to INR 186bn vs. INR 198bn for FY26BE (FY26RE: INR 75bn). | This scheme would improve the viability for purchasing a new home for EWS, LIG and MIG segments, though the credit linked subsidy. Revised estimates for FY26 is lower due to lower initial offtake, which is expected to improve during FY27. | Negative in the near term; Positive for affordable-focused HFCs such as AAVAS, HOMEFIRST, CANF over the medium term. |
| SWAMIH Fund II: Provision for FY27BE lowered to INR 6.5bn vs. INR 15bn for FY26BE. | Lower provision for last mile funding to developers in resolution of stranded projects indicates plausible narrowing down of stressed assets. | Negative for HFCs with high corporate NPAs such as PNBHOUSING, LICHF, PIRAMALF etc. from other income perspective. |
| Incentive scheme for promotion of RuPay debit cards & BHIM-UPI transactions (P2M): Provisions increased significantly to INR 20bn vs. INR 4.4bn for FY26BE (FY26RE: INR 22bn). | Positive for debit card issuers, acquiring banks, payment aggregators and UPI third‑party apps. | Positive for large Banks with high market share in RuPay/UPI such as SBIN, ICICIIBC etc. |
BFSI | Non-Leveraged Financials
| Budget Highlights | Impact | Recommendations |
|---|---|---|
| Tax exemption on interest components on awards by Motor Accident Claims Tribunal (MACT). | Positive as TP compensation demanded likely factored in the impact of income tax. | Marginally positive for general insurers: ICICIGI, GODIGIT and NIACL. |
| Increase in STT rates for Futures to 0.05% (vs 0.02% earlier) and for Options to 0.15% (vs 0.1%/0.125% earlier). | Continued clampdown on F&O speculative activity. This will increase impact costs for proprietary traders and arbitragers as they operate with very thin margins. | Marginally negative for discount brokers such as ANGELONE as most of their volume is via retail participants. However, will hurt overall liquidity. |
| Increase in investment limits for Individual Persons Resident Outside India (PROI) via PMS. | Limits at individual level increased to 10% from 5% and at aggregate PROI level to 24% from 10%. | Positive for alternate asset managers and wealth managers. |
| Exemption on Sovereign Gold Bond (SGBs) held until maturity, available only if subscribed in original issuance. | No tax exemption on SGBs purchased via open market. | Negative for brokers and capital intermediaries as this reduces marketability of SGBs (secondary market transactions). |
| Non‑allowability of interest as a deduction against dividend or such income from mutual funds (MF). | Section 93 earlier allowed deduction of interest expense up to 20% of gross dividend or such income; now, no such deduction is allowed. | Negative for asset managers as it reduces the flow for dividend or income-yielding MF schemes. |
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