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 stability of the Indian economy and financial institutions despite global challenges. **Key Points / Main Content** * **Global Economy and Markets:** * The global economy has been resilient but faces downside risks including uncertainty, high public debt, and potential market correction. * Global financial markets appear superficially strong but have underlying vulnerabilities, heightened by the growth of stablecoins and interconnectedness of banks and non-bank financial intermediaries. * **Indian Economy:** * The Indian economy continues to grow strongly, supported by robust domestic demand, low inflation, and macroeconomic policies. * **Domestic Financial System:** * The domestic financial system remains robust, with strong balance sheets and low market volatility, despite near-term external risks. * **Scheduled Commercial Banks (SCBs):** * SCBs maintain sound health with strong capital and liquidity buffers, improved asset quality, and robust profitability. * Macro stress tests confirm SCBs can withstand losses under adverse scenarios and maintain required capital buffers. The stress tests also confirm the resilience of mutual funds and clearing corporations. * **Non-Banking Financial Companies (NBFCs):** * NBFCs remain robust with strong capital buffers, earnings, and asset quality. * **Insurance Sector:** * The insurance sector shows balance sheet resilience, maintaining a consolidated solvency ratio above the required minimum. **Impact Analysis** **Scheduled Commercial Banks (SCBs)** *Impact:* SCBs need to ensure they maintain strong capital and liquidity buffers as well as sound asset quality and profitability. *Action Required:* SCBs should review the macro stress test results and take appropriate measures to enhance their resilience to potential adverse scenarios. **Non-Banking Financial Companies (NBFCs)** *Impact:* NBFCs must maintain strong capital buffers, solid earnings, and improving asset quality. *Action Required:* NBFCs should continue to focus on risk management and strengthen their balance sheets. **Insurance Sector** *Impact:* The insurance sector needs to maintain its balance sheet resilience and solvency ratio above the minimum threshold. *Action Required:* Insurance companies should continue to monitor and manage risks to ensure solvency. **Mutual Funds and Clearing Corporations** *Impact:* The resilience of mutual funds and clearing corporations should be maintained. *Action Required:* Maintain current resilience to ensure that losses can be withstood under hypothetical adverse scenarios.

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