RBI releases the Financial Stability Report, December 2025

**Executive Summary** The Reserve Bank 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. **Key Points / Main Content** *Global Economy and Financial Markets* * Global economy has been resilient but faces downside risks from uncertainty, high public debt, and potential market corrections. * Global financial markets appear strong but show growing vulnerabilities related to equities, risk assets, non-bank financial intermediaries, bank interconnectedness, and stablecoins. *Indian Economy and Financial System* * The Indian economy continues to grow strongly despite global challenges due to robust domestic demand, benign inflation, and prudent macroeconomic policies. * The domestic financial system remains robust, supported by strong balance sheets and easy financial conditions; however, near-term risks exist from external uncertainties. *Scheduled Commercial Banks (SCBs)* * SCBs remain healthy with strong capital and liquidity buffers, improved asset quality, and profitability. * Macro stress tests confirm 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) and Insurance Sector* * NBFCs remain robust, supported by strong capital buffers, solid earnings, and improving asset quality. * The insurance sector demonstrates balance sheet resilience, with the consolidated solvency ratio above the minimum threshold limit. **Impact Analysis** **Scheduled Commercial Banks (SCBs)** *Impact:* SCBs need to maintain strong capital and liquidity buffers, asset quality, and profitability. They must prepare for potential losses under adverse scenarios. *Action Required:* Ensure resilience by maintaining capital buffers above the regulatory minimum and conducting stress tests. **Non-Banking Financial Companies (NBFCs)** *Impact:* NBFCs need to maintain their robustness by focusing on capital buffers, earnings, and asset quality. *Action Required:* Continue to strengthen capital buffers, manage earnings, and improve asset quality. **Insurance Sector** *Impact:* The insurance sector must maintain balance sheet resilience and meet solvency requirements. *Action Required:* Ensure the consolidated solvency ratio remains above the minimum threshold limit. **Mutual Funds and Clearing Corporations** *Impact:* These institutions must maintain resilience in the face of hypothetical stress scenarios. *Action Required:* Use stress tests to ensure resilience. **Financial Stability and Development Council (FSDC)** *Impact:* FSDC needs to monitor risks to financial stability and ensure the resilience of the Indian financial system. *Action Required:* Continue to assess and mitigate risks to financial stability.

Key Entities Referenced