RBI releases the Financial Stability Report, December 2025

**Executive Summary** The Reserve Bank of India (RBI) has released the December 2025 edition of the Financial Stability Report (FSR). This report presents the Sub-Committee of the Financial Stability and Development Council's (FSDC) assessment of the Indian financial system's resilience and associated risks. The release provides an overview of the current economic landscape and the stability of various financial entities. **Key Points / Main Content** * **Global Economic Overview** * The global economy shows resilience due to fiscal measures, front-loaded trade, and AI investment, but persistent downside risks exist from uncertainty, high public debt, and potential market corrections. * Global financial markets appear strong but have underlying vulnerabilities, including rising equities and risk assets, increased roles of non-bank financial intermediaries, their interconnectedness with banks, and the growth of stablecoins, all contributing to global financial fragility. * **Indian Economic and Financial System Performance** * The Indian economy continues to grow strongly despite a challenging global backdrop, driven by robust domestic demand, low inflation, and prudent macroeconomic policies. * The domestic financial system is robust and resilient, supported by strong balance sheets, favorable financial conditions, and low market volatility. * Near-term risks to the domestic financial system stem from external geopolitical and trade uncertainties. * **Performance of Financial Entities** * **Scheduled Commercial Banks (SCBs):** Maintain sound health with strong capital and liquidity buffers, improved asset quality, and robust profitability. Macro stress tests confirm their resilience to adverse scenarios and their ability to maintain capital buffers above regulatory minimums. * **Mutual Funds and Clearing Corporations:** Stress tests affirm their resilience. * **Non-Banking Financial Companies (NBFCs):** Remain robust, supported by strong capital buffers, solid earnings, and improving asset quality. * **Insurance Sector:** Demonstrates balance sheet resilience, with a consolidated solvency ratio above the minimum threshold. **Impact Analysis** * **Financial Stability and Development Council (FSDC) Sub-Committee** * **Impact:** The FSDC Sub-Committee is responsible for collectively assessing the Indian financial system's resilience and risks. * **Action Required:** To have reviewed and contributed to the assessments presented in the FSR. * **Scheduled Commercial Banks (SCBs)** * **Impact:** Their health, capital, liquidity, asset quality, and profitability are assessed. They are confirmed to be resilient to hypothetical adverse scenarios. * **Action Required:** Continue to maintain strong capital and liquidity buffers and monitor asset quality. * **Non-Banking Financial Companies (NBFCs)** * **Impact:** Their robustness, supported by capital buffers, earnings, and asset quality, is highlighted. * **Action Required:** Continue to maintain strong capital buffers and monitor asset quality and earnings. * **Insurance Sector** * **Impact:** Its balance sheet resilience and consolidated solvency ratio above the minimum threshold are noted. * **Action Required:** Continue to ensure balance sheet resilience and maintain solvency ratios above the minimum threshold. * **Mutual Funds and Clearing Corporations** * **Impact:** Their resilience has been confirmed through stress tests. * **Action Required:** Continue to maintain resilience and adherence to regulatory requirements. * **Public and Market Participants** * **Impact:** The report provides information on the stability of the Indian financial system and potential risks, informing their decisions. * **Action Required:** Review the FSR to understand the current financial stability landscape and potential implications for their investments and operations.

Key Entities Referenced