RBI Financial Stability Report: Economy stays resilient, banks remain strong; top points to know on NPAs, unsecured loans and crypto risks

India’s economy continues to expand at a robust pace, supported by strong domestic demand, low inflation and healthy bank balance sheets, even as risks from unsecured lending, fintech exposure, external uncertainties and stablecoins persist, the Reserve Bank of India said in its December 2025 Financial Stability Report (FSR), PTI reported.The report said the domestic financial system remains “robust and resilient”, aided by strong balance sheets, easy financial conditions and low financial market volatility. However, it cautioned that geopolitical and trade-related uncertainties pose near-term risks to financial stability.Here are the key highlights of the report.

Growth outlook remains positive

The RBI noted that real GDP growth surprised on the upside in the first two quarters of FY 2025-26, registering 7.8% in Q1 and 8.2% in Q2.Growth was supported by strong private consumption and public investment. The central bank said the outlook remains positive, aided by low inflation, easy financial conditions, an above-normal monsoon, tax reforms and the continued expansion of digital public infrastructure.

Banks’ asset quality improves further

The health of scheduled commercial banks remains sound, with strong capital and liquidity buffers, improved asset quality and robust profitability, the report said.The gross non-performing assets (GNPA) ratio stood at a multi-decade low of 2.1% in September 2025 and is projected to improve further to 1.9% by March 2027 under a baseline scenario.Under adverse stress scenarios, the GNPA ratio could rise to 3.2% and 4.2%, the RBI said.

Capital buffers remain adequate

From a capital perspective, the capital to risk-weighted assets ratio (CRAR) remained strong as of September 2025, with public sector banks at 16% and private sector banks at 18.1%.The aggregate CRAR of 46 major scheduled commercial banks may decline from 17.1% in September 2025 to 16.8% by March 2027 under the baseline scenario. Under hypothetical adverse scenarios, it may fall to 14.5% and 14.1%.Stress tests indicated relatively higher depletion in the capital of public sector banks compared with private and foreign banks. Six banks, accounting for 15% of total banking assets, would breach the regulatory minimum CRAR under a severe shock.

Unsecured loans drive retail slippages

More than half of retail loan slippages are coming from unsecured products such as personal loans and credit cards, the RBI said.Unsecured loans accounted for 53.1% of total retail loan slippages. Among bank groups, private sector lenders recorded a higher share of fresh slippages.Unsecured loans contributed nearly 76% of slippages for private banks, compared with 15.9% for public sector banks. At an aggregate level, the GNPA ratio for unsecured retail loans stood at 1.8%, compared with 1.1% for overall retail advances.

Fintech lending flagged

The RBI flagged elevated impairment among borrowers who have taken unsecured loans from five or more lenders, highlighting the role of fintech firms.Unsecured loans account for more than 70% of fintechs’ total loan books, with over half of such loans extended to borrowers under 35 years of age.Between September 2024 and September 2025, fintech lending grew 36.1%, driven largely by personal loans, the report said.

Stablecoins pose risks to monetary sovereignty

In a special feature of the report, the RBI warned that widespread adoption of stablecoins could pose significant risks to India’s monetary sovereignty and financial stability.The central bank said foreign currency-denominated stablecoins could erode monetary control, weaken monetary policy transmission and complicate capital flow management, particularly for emerging economies like India.It reiterated that central bank money must remain the ultimate settlement asset and said central bank digital currencies can deliver efficiency and programmability while preserving trust in money.The RBI cautioned that stablecoins can be volatile, vulnerable to confidence shocks and structural fragilities, and could be misused for money laundering, terrorism financing and weapons proliferation without adequate regulation.

Rupee weakens on trade and capital flow pressures

The report said the rupee depreciated against the US dollar due to falling terms of trade, high tariffs and a slowdown in capital flows.Despite a broad weakening of the US dollar against other major and Asian currencies, the rupee weakened as India’s effective US tariff rate remained higher than that of its trading partners.