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 associated risks. The report highlights the resilience of the global and domestic economies and financial systems while noting potential vulnerabilities and risks. **Key Points / Main Content** **Global Economy and Markets** * The global economy has been resilient but faces downside risks due to uncertainty, high public debt, and the risk of a disorderly market correction. * Global financial markets show growing vulnerabilities, including a sharp rise in equities and other risk assets, the role of non-bank financial intermediaries, the interconnectedness of banks, and the growth of stablecoins. **Domestic Economy and Financial System** * The Indian economy continues to grow strongly due to robust domestic demand, benign inflation, and prudent macroeconomic policies. * The domestic financial system remains robust, supported by strong balance sheets, easy financial conditions, and low financial market volatility. However, there are near-term risks from external uncertainties, including geopolitical and trade-related factors. **Financial Institutions** * Scheduled commercial banks (SCBs) remain healthy with strong capital and liquidity buffers, improved asset quality, and robust profitability. * Macro stress tests confirm the resilience of SCBs to withstand losses and maintain capital buffers above the regulatory minimum, as well as 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 above the minimum threshold limit. **Impact Analysis** **RBI and FSDC** * **Impact:** The FSR informs the RBI and FSDC's understanding of the Indian financial system's stability and associated risks. * **Action Required:** Use the report's findings to inform policy decisions and regulatory measures to maintain financial stability. **Scheduled Commercial Banks (SCBs), Non-Banking Financial Companies (NBFCs), Insurance Sector, Mutual Funds, and Clearing Corporations** * **Impact:** Assessment of their financial health, resilience, and potential vulnerabilities. * **Action Required:** Maintain adequate capital and liquidity buffers, manage asset quality, and address any identified vulnerabilities to ensure continued stability and resilience. **Investors and Market Participants** * **Impact:** Provides insights into the stability and risks within the Indian financial system, informing investment decisions. * **Action Required:** Consider the report's findings when assessing risk and making investment allocations.

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