Multiple reports on banking seem to suggest that the banks are doing well, that they are hale and hearty. The Financial Stability Report (FSR) released last month said that the health of the scheduled commercial banks remains “sound with strong capital and liquidity buffers, improved asset quality and robust profitability”. Similarly the Report on the Trend and Progress in Banking (T&PB) said that the commercial banking sector remained “resilient” during 2024-25, supported by “double-digit balance sheet expansion”. But the same reports also show that ordinary people, particularly the ones at the bottom are not doing so well, in fact they are worse off as far as banking is concerned. Credit to micro, small and medium enterprises seems to have lost momentum as per T&PB. While public sector banks did increase their MSME lending portfolio, private banks slowed theirs to the extent that MSME credit as a share of total adjusted net bank credit fell from 19.3% in March 2024 to 19.0% in March 2025. The figures should concern us more in the context of the hardships that tariffs have brought to the MSME sector in recent times. The slowdown is even starker in agriculture. The finance minister even in the last two budgets spoke of Kisan Credit Cards (KCC) to facilitate short term loans to farmers. Yet, outstanding credit under KCCs grew by just 3.9% in 2024–25, compared with 10.8% growth the previous year. This weak credit expansion sits alongside deep structural distress. Nabard estimates show that about 55% of households dependent on agriculture and allied activities are indebted. While crops suffered weather damages and lower yield, the deflationary wind has meant lower incomes for farmers even as input costs remain high. There are apprehensions that rural wages may be falling thereby weakening demand for food which in turn is precipitating the low inflation. The cost of borrowing for businesses like infrastructure, trade, industry, and professional services has gone down significantly in recent years; but for farmers, the interest rate on loans has stayed nearly the same at around 10%.If we speak of household debt, the picture becomes starker. As per the FSR, household debt in India stood at 41.3% of GDP as of end-March 2025, marking a sustained rise compared to its five-year average of 38.3%. While this is alarming enough, the nature of credits is cause for further concern. Among the major categories of household borrowings, non-housing retail loans, largely taken for consumption purposes, continue to dominate. These loans accounted for 55.3% of total household borrowing from financial institutions as of September 2025, surpassing housing loans as well as agricultural and business-related borrowings. We are seeing disproportionately higher loans for consumption purposes than for asset creation or any productive purposes. People seem to be cash starved to even meet their day to day expenses.What can the budget do in such a context?It depends on the political will of the government. If it wants to gear the entire financial architecture in favour of the corporates and monopoly capital, then it can simply restrict itself to rhetoric as has been the case in recent years. For MSMEs for instance successive budgets in recent years have spoken of enhancement of credit guarantee cover or even new mechanism for facilitating continuation of bank credit during their stress period. But in reality, the high provisions that the banks are forced to cover for its massive write-offs to the big corporations, actually undercuts the share of credit available for MSMEs. Again, loan during stress is available only to those who have already taken a loan. Thus, this measure does not help the bulk of the MSME’s who are in need of credit. A concrete path forward for a budget intended for course correction can for instance be to strengthen Priority Sector Lending (PSL) norms with stricter enforcement. This entails creating sub targets, such that micro enterprises are also able to access credit and not just the bigger players in the MSME ecosystem. It entails enhanced budgetary support for MSME credit guarantee schemes and lastly it needs measures such that banks lend directly to borrowers and don’t simply use the route of Priority Sector Lending Certificates (PSLC) to lend through usurious NBFCs.For agriculture too, given the age of climate shocks and crop loss and indebtedness, among other things, we surely need budget-backed agricultural credit guarantee funds for socialising the losses and uncertainties. And similarly, we need measures that penalise banks that are unable to meet their PSL targets through direct lending to small and marginal farmers.Instead, what we have seen in recent years is the clear opposite. T&PB shows that PSL has in fact slowed. It grew by 12.5% in 2024–25, down from 16.9% a year earlier. This moderation was largely driven by private banks. Meanwhile, the market for PSLC expanded sharply, with trading volumes rising by 36.4%. Micro-enterprise and small and marginal farmers category saw the highest trading volumes showing the disinclination of banks to lend directly particularly to those at the bottom. Instead they are purchasing certificates to bridge the gap. Private banks dominated both buying and selling, underlining their reliance on financial instruments rather than direct engagement with priority borrowers.As far as the household debt crisis is concerned, the over-reliance on the largely unregulated NBFCs has emerged as a major concern. The usurious rates being charged given the removal of interest ceiling by the RBI, the notorious recovery practices and the digital privacy concerns have been flagged by the RBI, Nabard and the courts at multiple junctures. Today, nearly 85% of the micro loans under Rs 50,000 are provided by the NBFCs which basically means we have left the most vulnerable in the hands of the predatory modern day money lenders. Stories of debt induced suicides, frauds and harassments are increasing manifold. Field studies underline that a large share of these loans are being taken only to meet consumption needs – most prominent among them being basic services like education and health. This debt trap is thereby reinforced by the steady erosion of social protection that was earlier meant to shield households from precisely these shocks. Recent budget trends show that entitlements and welfare guarantees have either stagnated or declined, even as the government claims success in meeting fiscal or scheme level targets. These are not disconnected failures but outcomes of a political choice to withdraw the state from social protection at a time when households are increasingly forced to borrow to survive.This is most clearly visible in the National Social Assistance Programme. Its allocation has fallen from 0.58% of total expenditure in 2014-15 to just 0.2% in 2025 26. While the budget appears stagnant at around Rs 9,500 crore, this represents a sharp decline in real terms after inflation. A similar pattern is evident in healthcare. Public health care today is in such bad shape that people are forced to go to private healthcare even when they know they would have to pay four to six times more. More than a quarter of our elderly are living households that are spending more than 40% of their non essential expenses on just healthcare. Despite the claims of reduced out of pocket expenses and Ayushman Bharat, CMIE’s Consumer Pyramid Household Survey or the Consumer Expenditure Survey (CES) 2022–23 both show that families are having to spend considerably more on health care. And the burden of health expenses is still largely medicine costs. Even today three out of every four rupees spent from pocket is on account of medicines and it is not covered by Ayushman. So, it is no surprise that health stands out as a major contributor to household debt and distress driving millions below poverty line.In the case of education, despite the Kothari Commission recommendation, reaffirmed by NEP 2020, that public spending on education should be 6% of GDP, actual expenditure has remained stuck at around 2.5% allowing private players to fill the gap. Households are therefore forced to borrow for money leaching private school fees, higher education and private coaching. With household debt increasingly driven by basic consumption needs such as health crises and education, the withdrawal of the state from social protection directly feeds the debt spiral. A budget that genuinely seeks to address the household debt crisis must therefore restore and expand public spending on health, education and social security, so that borrowing is not the only means of accessing basic services.The banking budget we needInstead of speaking of further privatisation and merger as the finance minister has been doing in the run up to the budget (as per World Bank’s suggestions), what we need is an expanded role and presence of public sector banks. The trend in the banks’ operating expenses shows a shrinking public sector. The wage bill figures for the public sector came down from Rs 1,84,025 crore to Rs 1,77,894 crore just over the last year. While the same for the private sector has been increasing over the same period (from Rs 90,290 crore to Rs 98,841 crore). Any budget that continues down the same path will be a walking further away from the social obligation of banking in India.Instead of fancy salons in the name of Insolvency and Bankruptcy Code that gives convenient haircuts to the super rich, we need a budget that makes amends based on the parliamentary standing committee’s recommendations to actually improve recoveries instead of the mounting write offs. Instead of replacing actual banks with banking correspondents (as per the suggestions of foreign consultants), we need more brick and mortar full service branches particularly in rural areas. RBI’s own financial inclusion strategy document flags that an overwhelming share (63%) of banking correspondents operate in rural areas which is resulting in poorer access to banking, limited/low quality services with only a few offering savings, deposits, insurance, pensions, credit, or KCC/GCC facilities. The budget needs to once again walk the path of nationalisation, it needs to for instance incentivise rural branches by making recapitalisation conditional. Instead of only showing interest in viability gap funding for corporates, the budget needs to do the same for rural banking. It needs to treat investing in more staffing in public sector banks as public investment instead of treating it as a “burden”. In short, it needs to put people over profit alone.Anirban Bhattacharya is associated with the Centre for Financial Accountability and Nancy Pathak is associated with the Financial Accountability Network.