Indian Economy Robust, but Geopolitical and Trade Risks Persist: RBI Financial Stability Report

Malhotra noted that the Indian economy and the financial system remain robust and resilient, supported by strong growth, benign inflation, healthy balance sheets of financial and non-financial firms, sizeable buffers, and prudent policy reforms.

“Nonetheless, we recognise the near-term challenges from external spillovers and continue to build strong guardrails to safeguard the economy and the financial system from potential shocks,” he said.

The Financial Stability Report (FSR) is a half-yearly publication with contributions from all financial sector regulators. It presents the collective assessment of the Sub-Committee of the Financial Stability and Development Council on current and emerging risks to the stability of the Indian financial system.

The domestic financial system, Malhotra said, remains stable in terms of institutional soundness and systemic resilience. Banks and non-banking financial institutions (NBFIs) remain healthy, bolstered by strong capital and liquidity buffers, robust earnings, and improved asset quality. Financial markets, however, remain susceptible to global spillovers, he warned.

Net household financial savings improved to 7.6 percent of GDP in Q4:2024-25 on account of a rise in financial assets and stabilisation of liabilities, while the stock of gross financial assets remained steady above 100 percent of GDP. As per the latest data, growth in the financial wealth of households moderated, reflecting a correction in equity and investment funds. In terms of asset allocation, deposits, insurance, and pension funds accounted for nearly 69.2 percent of household financial wealth as of end-March 2025, even as the share of equities and investment funds increased marginally.

The report highlighted that India’s household debt climbed to 41.3 percent of GDP as of end-March 2025, marking a sustained increase over its five-year average of 38.3 percent. While the rise reflects stronger borrowing by households, the overall level of debt remains lower than that of most peer emerging market economies. The composition of household borrowing continues to tilt towards consumption. Non-housing retail loans, largely taken for consumption purposes, accounted for 55.3 percent of total household borrowings from financial institutions as of September 2025. Their share has steadily increased over the years, with growth consistently outpacing housing loans as well as agriculture and business loans.

The RBI also warned that widespread adoption of stablecoins could pose significant risks to India's monetary sovereignty and financial stability.