Budget 2026: BFSI Sector Faces Mixed Impact, Digital Payments Get Boost

• Government bond yields may rise due to increased borrowing, negatively impacting banks' treasury portfolios and NBFC borrowing costs.
• Significant increase in UPI incentives (₹2,000 crore for FY27, ₹2,196 crore for FY26) will boost digital payment players like Paytm and Mobikwik.
• A 'High-Level Committee on Banking for Viksit Bharat' is proposed for sector review, potentially leading to structural reforms and PSB consolidation.
• Restructuring of PFC and REC is proposed, possibly involving a merger to eliminate holding company discount and generate positive sentiment.
• New Infrastructure Risk Guarantee Fund and SME Growth Fund (₹10,000 crore) aim to enhance infrastructure financing and provide equity support to MSMEs, benefiting specific banks and NBFCs.

Why It Matters: Budget 2026 offers targeted support for digital payments and MSMEs, but higher borrowing may pressure bond yields.