RBI releases the Financial Stability Report, December 2025

**Executive Summary** The Reserve Bank of India (RBI) released the December 2025 edition of the Financial Stability Report (FSR) on December 31, 2025. The FSR reflects the collective assessment of the Sub-Committee of the Financial Stability and Development Council (FSDC) on the resilience of the Indian financial system and risks to financial stability. The report highlights key aspects of the global and domestic economic and financial landscape. **Key Points / Main Content** * **Global Economy:** * The global economy has been resilient, supported by fiscal measures, front-loaded trade, and strong AI-related investment. * Downside risks persist due to elevated uncertainty, high public debt, and the risk of a disorderly market correction. * Global financial markets appear strong on the surface but show growing underlying vulnerabilities. Fragilities are heightened by the rise in equities and other risk assets, the role of non-bank financial intermediaries (NBFIs), their interconnectedness with banks, and the growth of stablecoins. * **Domestic Economy:** * The Indian economy continues to grow strongly, underpinned by robust domestic demand, benign inflation, and prudent macroeconomic policies. * The domestic financial system remains robust and resilient, bolstered by strong balance sheets, easy financial conditions, and low financial market volatility. * Near-term risks exist from external uncertainties, specifically geopolitical and trade-related. * **Financial Institutions:** * Scheduled commercial banks (SCBs) remain sound with strong capital and liquidity buffers, improved asset quality, and robust profitability. * Macro stress tests affirm the resilience of SCBs to withstand losses and maintain capital buffers above the regulatory minimum; stress tests also confirm the resilience of mutual funds and clearing corporations. * Non-banking financial companies (NBFCs) remain robust, supported by strong capital buffers, solid earnings, and improving asset quality. * The insurance sector continues to display balance sheet resilience, with the consolidated solvency ratio remaining above the minimum threshold limit. **Impact Analysis** **Stakeholder: Scheduled Commercial Banks (SCBs)** * **Impact:** SCBs are shown to be resilient with strong buffers. This validates their current practices and financial health. * **Action Required:** Maintain current levels of capital and liquidity and continue monitoring for external uncertainties. **Stakeholder: Non-Banking Financial Companies (NBFCs)** * **Impact:** NBFCs are shown to be robust. * **Action Required:** Continue to maintain strong capital buffers, solid earnings, and improving asset quality. **Stakeholder: Insurance Sector** * **Impact:** The sector is shown to be resilient and the consolidated solvency ratio remains above the minimum threshold limit. * **Action Required:** Maintain balance sheet resilience to remain above the minimum threshold limit. **Stakeholder: Reserve Bank of India (RBI) / Financial Stability and Development Council (FSDC)** * **Impact:** Provides insights into the overall stability and potential risks within the Indian financial system, allowing for informed policy decisions and regulatory adjustments. * **Action Required:** Continue monitoring global and domestic economic trends, assess potential risks, and implement appropriate measures to maintain financial stability.

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