The Reserve Bank of India on Wednesday released the December 2025 edition of its Financial Stability Report (FSR), presenting the collective assessment of the Sub-Committee of the Financial Stability and Development Council (FSDC) on the resilience of the Indian financial system and emerging risks to financial stability.
The report noted that the global economy has remained resilient, supported by fiscal measures, front-loaded trade activity and strong investment linked to artificial intelligence. However, it cautioned that downside risks persist amid elevated uncertainty, rising public debt levels and the possibility of a disorderly market correction.
According to the RBI, global financial markets appear strong on the surface but are exhibiting growing underlying vulnerabilities. A sharp rise in equities and other risk assets, the expanding role of non-bank financial intermediaries and their increasing interconnectedness with banks, along with the growth of stablecoins, have heightened fragilities in the global financial system.
Against this backdrop, the RBI said the Indian economy continues to grow strongly despite an uncertain and challenging global environment. The growth is being supported by robust domestic demand, benign inflation and prudent macroeconomic policies.
The domestic financial system remains robust and resilient, underpinned by strong balance sheets, accommodative financial conditions and low market volatility. However, the report flagged near-term risks arising from external uncertainties, including geopolitical and trade-related developments.
The RBI said the health of scheduled commercial banks remains sound, with strong capital and liquidity buffers, improved asset quality and robust profitability. Macro stress tests indicated that banks are well positioned to withstand losses under hypothetical adverse scenarios while maintaining capital levels well above regulatory requirements. Stress tests also confirmed the resilience of mutual funds and clearing corporations.
Non-banking financial companies continue to remain stable, supported by strong capital buffers, solid earnings and improving asset quality, the report said. The insurance sector also remains resilient, with the consolidated solvency ratio staying above the minimum regulatory threshold.
Source: RBI
