MUMBAI: The financial sector wants the forthcoming Budget to launch structural reforms to improve affordability, access and long-term financial security and push consumption as GST rate cuts and a massive hike in the personal income exemption limits have not lifted the demand curve.
Stakeholders from the financial services ecosystem such as banks, insurers, brokers, non-banks and digital lenders also want the government to use the Budget to address systemic gaps that continue to limit penetration across insurance and credit markets.
While bankers want a further consumption boost, insurers want regulatory clarity on composite license and tax parity to deepen financial inclusion so that more people are insured. They want the Budget to address the issues in taxes on annuity and pension products, composite licensing, and micro-insurance apart from resolving the input tax credit on sales.
Non-banks focused on small businesses and digital lending want the government to help them grow in a more sustainable manner which could be addressed by increasing credit access to small businesses and further strengthening the digital lending safeguards.
Health insurers want policy measures that encourage preventive healthcare which can significantly lower long-term treatment costs. Industry reports indicate that preventive care reduces hospitalisations and improves health outcomes. Introducing separate and enhanced tax benefits for OPD services and preventive health screenings, beyond the current limits under Section 80D, would encourage wider adoption of preventive care, they say.
This is more so, as the population ages with the rising burden of chronic diseases, a prevention-led approach, supported by budgetary reforms, can play a critical role in improving health outcomes in the country.
The foremost demand of insurers relates to the tax treatment of annuities and pension products. According to a recent Deloitte report, annuity payouts from insurance products are currently taxed on the entire amount, including the principal that has already been taxed during the accumulation phase.
Deloitte has called for government co-funding, public–private risk pools and better access to climate data to help scale resilience-focused insurance products and reduce the fiscal burden of post-disaster relief.
As insurers increasingly adopt telematics in motor insurance, AI-led underwriting and health data integration through platforms such as the National Health Claims Exchange, data fragmentation continues to constrain efficiency and fraud detection, says the pre-budget report.
Insurers are also seeking creation of a unified insurance data exchange, potentially built on existing institutions such as the Insurance Information Bureau. Such a framework, anchored in robust consent and privacy safeguards, can lower loss ratios, enable personalised pricing and improve trust in insurance systems.
Composite licensing remains a long-pending reform on the insurance industry’s wish list and something the newly amended Insurance Act ignored once again while it allowed 100% foreign investment.
“Composite licensing is fundamentally about efficiency and customer experience,” said Naveen Chandra Jha, chief executive of SBI General Insurance. “It allows insurers to design solutions around life events rather than product silos, while also lowering structural costs.”
He also called for a structured refinance mechanism for small businesses and priority-sector lending, regulatory and tax parity with banks, and policy clarity on recovery mechanisms to sustain lending momentum without increasing borrower stress.
Calling for affordability, Tarun Chugh, chief executive of Bajaj Life Insurance, said, “Our insurance challenge is not demand alone, but affordability, trust and access. The Budget has an opportunity to shift insurance from a discretionary product to a foundational element of household security,” pointing to the low insurance penetration that remains at around 3.7% of GDP, well below global benchmarks. Life insurance penetration has slipped to 2.7%, while general insurance penetration has stagnated at about 1%, according to Irdai data.
According to Sajja Praveen Chowdary, director, Policybazaar, one of the key expectations from the Budget is to offer GST relief on health insurance/other employee insurances to MSMEs which employ many more people at the lower spectrum of income in the society.
“MSMEs usually rely on employee benefits like group health insurance to attract and retain talent. The existing GST regulations create a further burden because MSMEs cannot claim input credit for the GST paid on employee health/life insurance premiums. Although a total waiver may not be feasible for all businesses, the government can consider providing some relief to MSMEs," he said.
“This can only benefit the budget and country indirectly over a medium to longer term as in this lower income segment covered by MSMEs in absence of such coverage, the population has to rely completely on government subsidies and schemes for either hospitalization or for uplifting their strata in case of death/disablement of a breadwinner,” Chowdary added.
Deepak Aggarwal, co-founder of Moneyboxx Finance, expects the Budget to place rural and semi-urban MSMEs and first-time borrowers at the centre of its financial inclusion agenda. NBFCs have become the primary conduit of formal credit in these markets, supporting agri-allied businesses, services, and small manufacturing units.
“Achieving regulatory and tax parity with banks will enable NBFCs to deploy capital more efficiently at the grassroots. The Budget must acknowledge the systemic role NBFCs play in rural and semi-urban India’s growth story and strengthen them accordingly,” he added.
Sumit Madan, chief executive, Axis Max Life Insurance, wants the Budget to take measures to “strengthen households’ financial security. Enhancing affordability through simpler, higher, and inflation-aligned tax incentives under Sections 80C, 80CCC, and 80CCD can play a critical role in reviving long-term savings and insurance adoption."
He said, “Equally important is the introduction of a separate tax deduction for pure term insurance, outside the existing 80C framework, to meaningfully address India’s persistent protection gap and reinforce life insurance as a foundational pillar of a resilient, sustainable, and future-ready $5 trillion-plus economy.”
Federal Bank chief executive KVS Manian is forthcoming with his demand for more measures to lift consumption especially in the hinterland, saying unless the consumption story, which has been the missing link for long in the growth story, picks up, the present growth rate cannot be sustained for long.
“The Budget has to do some more heavy lifting to boost consumption,” said Manian who expects the finance minister to offer some booster doses for demand pick-up by tweaking the direct taxes by which the Budget can be more growth-oriented.
On the other hand, Radhika Rao, the senior economist at DBS Bank, expects the Budget to meet the fiscal deficit target through spending rationalization and does not see any more changes in the current income tax slabs.
Matías Gainza Eurnekian, chief executive of Federal Card Services, wants the Budget to extend and modernise schemes such as the production-linked incentives particularly for next-generation technologies.
Dilip Modi, founder of Spice Money, said the Budget should continue to prioritise the non-bank business correspondents ecosystem and rural fintechs that enable last-mile access to essential banking services. Strengthening this network through better infrastructure support, digital enablement, and sustainable incentive structures will significantly deepen formal banking penetration, he added.
“Rural fintechs have played a pivotal role in making everyday banking accessible and reliable for underserved communities. Enhanced connectivity in rural areas, and adoption of vernacular and voice-based interfaces can further drive usage and trust among first-time users,” he said.
Srikrishna Narasimhan, chief executive of GlobalPay, wants the government to extend the TCS exemption available to education remittances funded through loans to education-related payments made from a student’s own funds as the increasing reliance on exclusive or semi-closed education payment platforms linked to specific universities raises concerns around fee opacity, pricing power, and limited consumer choice. Ensuring open access and fee neutrality in education remittances is therefore critical.
Bhupinder Singh, promoter & chief executive of Incred Holdings, wished the government lowers the Sarfaesi Act’s minimum loan threshold for NBFCs from Rs 20 lakh to Rs 1 lakh to restore parity with HFCs, materially shorten recovery cycles, and deliver a tangible uplift in asset quality.
Srikanth Kandikonda, chief financial officer at Manipal Cigna Health Insurance, wants the government to help contain "medical inflation, which continues to be one of the biggest challenges facing the healthcare system, projected at 11.5–14%, which is among the highest in Asia."
He said, “While measures such as the removal of GST on insurance premiums and allowing 100% FDI in insurance can improve affordability and sector resilience, rising medical costs continue to put pressure on households,” adding that the Budget can help strengthen healthcare affordability through higher public health spending and a sharper focus on prevention.
Currently, public health expenditure remains below global benchmarks and even short of the National Health Policy target of 2.5% of GDP in 2025. Enhancing the budgetary outlay for public health would strengthen primary care networks, expand preventive services, and relieve financial stress on citizens, he said.
Insurance brokers on the other hand want clarity on input tax credit treatment for distribution and digital services following GST changes, arguing that unresolved tax costs ultimately get embedded into premiums. They are also looking for regulatory simplification, faster progress on composite licensing, budgetary support for rural insurance coverage and digital infrastructure, and clarity on the proposed healthcare regulatory framework.