20, Feb 2023
Union Budget 2023: An enabler for India’s banking sector

By Mr. Amar Deo Singh, Head Advisory, Angel One Ltd

The banking sector in India has been a crucial component in the country’s economic growth, providing financial services and support to individuals, businesses and the government. Indian banks have been resilient and withstood the strong headwinds that significantly impacted other economies in the last few months. However, the current ecosystem of the banking industry is marked by several challenges, such as asset quality, digital transformation and ensuring financial inclusion. The Union Budget 2023 has addressed these concerns through various measures aimed at boosting the banking sector and improving the overall financial landscape of the country.

Strengthening the financial ecosystem

The budget for this year signalled the government’s intention to maintain stability while fostering balanced economic expansion. The suggested policy reforms and greater capital infusion will stimulate MSMEs and the startup ecosystem. One of the major highlights was revamped credit guarantee scheme. The inflow of INR 9,000 crores into the corpus of the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) will give MSMEs more access to collateral-free loans. This new scheme will also enable two lakh crores of new collateral-free guaranteed financing. It would increase the growth of MSMEs in India while enhancing their international competitiveness.

Furthermore, credit costs are to be reduced by about 1%. It will aid the asset quality of small business loans for public sector banks.

Greater focus on governance and investor protection

Financial regulators in India have contributed to developing one of the world’s most robust banking and financial systems. According to the Union Budget 2023, a national financial information registry would be established to act as the central repository for financial and ancillary data. This will enhance the efficient flow of credit, increase financial inclusion, and support financial stability. In addition, authorities of the financial sector regulators will be required to conduct a full assessment of existing legislation to cut costs and simplify compliance.

Simultaneously, the proposed revisions to the Banking Regulation Act, the Banking Companies Act, and the Reserve Bank of India Act aim to improve bank governance and enhance investor protection. In addition to strengthening the internal mechanisms and operations of fintech and data-driven credit disbursement companies, this initiative will aid banking authorities in promoting financial inclusion and fostering better credit facilities. This, in turn, may lessen the compliance burden and improve the ease of doing business in India.

Benefits for Senior Citizens

The budget also introduced changes to the Senior Citizen Savings Scheme (SCSS), where the maximum deposit limit is increased from INR 15 lakh to INR 30 lakh. Also, the rise in the maximum limit in the Monthly Income Account Scheme from INR 4.5 lakh to INR 9 lakh for a single account and from INR 29 lakh to INR 15 lakh for a joint account is a positive move. It will enable senior citizens to contribute larger amounts to SCSS, making it a better investment choice than FDs and accounts.


With ongoing technological advancements, the banking sector is putting a larger emphasis on offering better services to customers and enhancing its digital infrastructure to improve the overall customer experience. This gives banks a competitive advantage. The Union Budget’s focus on improving the credit scheme for equipping MSMEs with access to financing and continuing the reforms in terms of investor protection will provide further impetus to growth in the banking sector. As more growing businesses turn to banks for financing, these propositions indicate that India’s banking sector is poised for robust growth.

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