MC EXCLUSIVE Key focus of banking committee to bring 300-350 million Indians in the financial ecosystem: DFS Secretary Nagaraju

Department of Financial Services (DFS) Secretary M. Nagaraju

• Government aims to bring 300-350 million Indians into the banking ecosystem
• Cabinet to decide on raising FDI limit in PSU banks to 49 percent
• IDBI Bank divestment likely to happen this financial year

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"We wish to bring 300-350 million people in the financial ecosystem, and for that we need to find 'new instruments and new channels'," M Nagaraju, Secretary, Department of Financial Services told Moneycontrol.

"We need to find new instruments, channels, design new credit underlying principles…so that we can bring 300-350 million Indians into the banking ecosystem," Nagaraju said in an exclusive interview. "This is one of the key reasons why the Finance Minister announced a banking committee in the Budget speech."

On raising the limit on foreign direct investment (FDI) in PSU banks to 49% from 20%, Nagaraju said the Cabinet has to take a decision, as the proposal is ready.

The DFS Secretary also noted that the government will get financial bids for IDBI Bank this month. "The divestment of the government’s stake in the bank will most likely happen this financial year," he said.

The government plans to divest 30.48 percent stake in IDBI, roughly valued at about Rs 33,000 crore.

High Level Banking Committee

During her Budget speech on February 1, Finance Minister Nirmala Sitharaman proposed setting 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.

The Indian banking sector today is characterised by strong balance sheets, historic highs in profitability, improved asset quality and coverage exceeding 98% of villages in the country, Sitharaman had said. "At this juncture, we are well-placed to futuristically evaluate the measures needed to continue on the path of reform-led growth of this sector," she had noted.

The Terms of Reference (ToR) of the Committee is likely to finalised by the end of FY26, said Nagaraju.

Further, the Financial Services Secretary said that credit-to-non-financial sectors currently stand at 56 percent, which can be doubled in the coming years, and the government is working on those steps. "The committee will be looking at all these areas," he said.

Nagaraju also said that the country’s financial system is now very robust. "We are growing at 7% GDP annually very year. For that we have much credit requirements."

Banks credit growth is currently 10%, if they grow beyond this, it’s very easy to "double their total business in the next four years," said the Secretary.

According to RBI, bank credit growth—year-on-year—stood at 11.1 percent in 2024-25, down from 15.3 percent in 2023-24.

The deceleration in credit growth was observed across all bank groups during FY25. Private sector banks witnessed the steepest decline to 9.5 per cent in March 2025 after a sustained credit growth above 15 per cent for the preceding three years, says the RBI.

On the Rs 10,000 crore MSME fund, the DFS Secretary said that the aim of the fund is to help the medium enterprises expand and become better.

"These are MSMEs who are functioning well, making profits, and exporting to other countries. We will now identify MSMEs in different sectors, to help them become better MSME exporters in the world," said Nagaraju.

"This fund will be used to support MSMEs through both debt and equity," he added.