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 Sub-Committee of the Financial Stability and Development Council's (FSDC) assessment of the Indian financial system's resilience and associated risks. The report highlights the robustness of the Indian financial system amidst global uncertainties. **Key Points / Main Content** *Global Economic and Financial Environment:* * The global economy has shown resilience but faces risks due to uncertainty, high public debt, and potential market correction. * Global financial markets appear superficially strong but have underlying vulnerabilities, including the rise of risk assets, interconnectedness of financial institutions, and the growth of stablecoins. *Indian Economic and Financial System:* * The Indian economy continues to grow strongly, supported by domestic demand, benign inflation, and macroeconomic policies, despite global challenges. * The domestic financial system remains robust, supported by strong balance sheets and low financial market volatility, but faces near-term external risks related to geopolitics and trade. *Performance of Financial Institutions:* * Scheduled commercial banks (SCBs) have strong capital and liquidity buffers, improved asset quality, and robust profitability. * Macro stress tests confirm SCBs' resilience to withstand losses under adverse scenarios while maintaining capital buffers above the regulatory minimum; resilience of mutual funds and clearing corporations is also confirmed. * Non-banking financial companies (NBFCs) remain robust, supported by strong capital buffers, solid earnings, and improving asset quality. * The insurance sector continues to show balance sheet resilience, with the consolidated solvency ratio above the minimum threshold. **Impact Analysis** **Scheduled Commercial Banks (SCBs) Impact** *Impact:* SCBs are validated to have strong financial health and resilience to withstand hypothetical adverse economic scenarios. *Action Required:* Maintain and continue to improve capital and liquidity buffers, asset quality, and profitability. **Non-Banking Financial Companies (NBFCs) Impact** *Impact:* NBFCs are recognised to be robust and well-supported. *Action Required:* Maintain strong capital buffers, solid earnings, and continue to improve asset quality. **Insurance Sector Impact** *Impact:* The insurance sector is confirmed to have resilient balance sheets. *Action Required:* Maintain solvency ratio above the minimum threshold. **Mutual Funds and Clearing Corporations Impact** *Impact:* Their resilience is affirmed through macro stress tests. *Action Required:* Ensure maintaining financial strength against adverse scenarios. **Regulatory Bodies (e.g., RBI, FSDC) Impact** *Impact:* The FSR provides a comprehensive assessment of the financial system, informing regulatory policies and risk management strategies. *Action Required:* Continue monitoring risks, refining policies, and ensuring stability of the financial system.

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