Business in financial services just got easier with Budget 2025-26 reforms

Budget reforms will redefine the financial system by fostering inclusion, competition, and efficiency. Financial institutions will benefit from enhanced market depth and improved liquidity

The Union Budget for 2025-26 unveils a transformative strategy for deregulation, business efficiency, and competitive spirit in the financial services sector. With a keen focus on innovation, streamlining regulatory frameworks, and empowering key growth sectors, the Budget promises to reshape the financial ecosystem and create lasting value for businesses, financial institutions, and consumers alike.

 

The introduction of the revamped Central KYC Registry marks a pivotal shift: It eliminates redundant documentation and significantly reduces operational costs. This initiative will speed up customer onboarding, enable seamless integration of digital banking services, and improve loan processing and insurance underwriting. It will also enhance compliance and minimise fraud risks, creating a more secure and efficient environment for digital services such as e-wallets, micro-lending, and investment platforms.

 

The repurposing of India Post as a logistics organisation will enable the leveraging of its vast network, and sachetisation of financial products. This will be a game-changer for fintechs by reducing their customer-acquisition costs and allowing them to offer micro-insurance, digital savings plans, and low-ticket loans in regions where traditional banking’s reach is limited. 

 

The government’s allocation of ₹10,000 crore for startups underscores its commitment to fueling fintech innovation. This will catalyse the development of cutting-edge technologies like blockchain-powered lending, AI-driven financial advisory services, and peer-to-peer lending platforms. As embedded finance – integrating financial services with non-financial platforms – gains traction, fintechs will be able to offer more seamless access to credit, payments, and insurance. 

 

The focus on agriculture, small businesses, investments and exports as the four engines of growth will drive a surge in credit demand. To address this need, financial institutions will be tasked with providing solutions, such as collateral-free loans, digital agricultural financing, and export financing. The introduction of small finance bank and universal bank licence window for cooperative banks will widen the reach of financial services. 

 

The introduction of a digital platform for trade documentation will simplify cross-border transactions. The platform will reduce the time and costs in trade financing and improve transparency. For financial institutions involved in trade finance, the initiative will streamline compliance and documentation. The platform will improve the flow of letters of credit, trade insurance, and foreign exchange services.

 

Allowing 100 per cent foreign direct investment in insurance will inject significant capital in the market. It is expected to increase insurance penetration, especially in health and life insurance. As foreign players enter the market, competition will lead to better products and lower premiums. The mechanism to evaluate the impact of financial regulations and subsidiary instructions under the Financial Stability and Development Council and establishing a High-Level Committee for regulatory reforms in the non-financial services sector marks a fundamental shift towards broader deregulation.

 

The Budget introduces strategic reforms that will redefine our financial ecosystem by fostering greater inclusion, competition, and efficiency. Startups and micro, small and medium enterprises will get easier access to capital and reduced regulatory friction. Financial institutions will benefit from enhanced market depth, improved liquidity, and diversified product offerings, enabling them to serve a broader customer base. Consumers, particularly in underserved regions, will get increased access to affordable and digitally integrated financial services. This holistic approach will not only stimulate economic growth, job creation, and global competitiveness but also position India as a more agile and investment-friendly economy.

 

The writers are, respectively, partner and financial services risk leader; and assistant manager and fintech industry business partner, markets ecosystem, at Grant Thornton Bharat. The column has been edited for space