India’s financial system remains resilient despite global uncertainties, according to the latest assessment by the central bank. The report points to strong economic growth and healthier banks but also cautions against emerging risks. Issues such as rising unsecured loans, fintech led credit expansion, and global monetary challenges require close monitoring to ensure long-term financial stability.
Why in the News?
- The Reserve Bank of India released its Financial Stability Report (FSR), December 2025.
- The report evaluates systemic risks, banking sector resilience, and emerging threats to India’s financial stability.
Important Key Highlights Of Report
Growth Outlook Remains Positive
- The RBI noted that India’s real GDP growth exceeded expectations in the first half of FY 2025–26.
- Growth stood at 7.8% in Q1 and 8.2% in Q2, driven mainly by strong private consumption and sustained public capital expenditure.
- This robust growth environment has supported credit demand and improved the financial health of borrowers which is contributing positively to overall financial stability despite a challenging global economic backdrop.
Improvement in Banks Asset Quality
- The asset quality of Scheduled Commercial Banks (SCBs) has improved further.
- The Gross Non-Performing Assets (GNPA) ratio declined to 2.1% in September 2025, reflecting strong recoveries and prudent lending practices.
- Better risk management and resolution of stressed assets have helped banks strengthen their balance sheets.
- This improvement enhances the banking sector’s capacity to support economic growth through increased lending.
Capital Position of Banks
- Banks in India continue to maintain adequate capital buffers.
- The Capital to Risk-Weighted Assets Ratio (CRAR) remained strong as of September 2025.
- Public sector banks reported a CRAR of 16%, while private sector banks stood higher at 18.1%.
- Strong capital adequacy ensures that banks can absorb potential shocks and continue lending even during periods of financial stress.
Emerging Risks: Unsecured and Fintech Loans
- The RBI flagged unsecured loans as a key vulnerability.
- These loans accounted for 53.1% of total retail loan slippages, with private banks facing higher exposure.
- The report also highlighted risks from fintech lending, where over 70% of loan portfolios are unsecured.
- Borrowers taking loans from multiple lenders showed higher impairment, raising concerns about over-leveraging and weak credit assessment.
Stablecoins and External Sector Concerns
- The RBI reiterated concerns about stablecoins, especially those denominated in foreign currencies.
- Such instruments could undermine monetary sovereignty and weaken the effectiveness of monetary policy.
- Additionally, the Indian rupee depreciated against the US dollar, influenced by weaker terms of trade, high global tariffs, and slower capital inflows, adding to external sector risks.
About Financial Stability Report
- The Financial Stability Report (FSR) is a biannual publication of the RBI.
- It assesses risks and resilience across banks, NBFCs, mutual funds, insurance firms, and financial markets.
- The report plays a crucial role in early identification of systemic risks and helps policymakers take preventive measures to safeguard the financial system.
Key Summary At Glance
| Aspect | Details |
| Why in News? | Release of RBI Financial Stability Report |
| Report Edition | December 2025 |
| GDP Growth | 7.8% (Q1), 8.2% (Q2) FY 2025–26 |
| GNPA Ratio | 2.1% (September 2025) |
| Bank Capital (CRAR) | PSBs: 16%, Private: 18.1% |
| Key Risk | Rising unsecured and fintech loans |
| New Concern | Stablecoins affecting monetary sovereignty |
| Nature of Report | Biannual RBI publication |
Question
Q. According to the RBI’s Financial Stability Report, the GNPA ratio of banks stood at,
A. 3.5%
B. 2.8%
C. 2.1%
D. 1.5%