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Informist, Wednesday, Dec. 31, 2025

 

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--RBI Malhotra: Regulators recognise fincl stability is not an end in itself 
--RBI Malhotra:Maintaining, strenthening fincl system remains our north star 
--RBI Malhotra: Financial markets remain susceptible to global spillovers 
--RBI Malhotra: Stress tests endorse resilience of banks, NBFCs 
--RBI Malhotra:Fincl cos stay healthy on high earnings, better asset quality 
--RBI Malhotra: Fincl cos remain healthy on strong capital, liquidity buffers 
--RBI Malhotra:To build strong guardrails to safeguard econ from likely risks 
--RBI Malhotra: Recognise near-term challenges to econ from global spillovers 
--RBI Malhotra:India econ projected to post high growth on strong investment 
--RBI Malhotra: India econ projected to post high growth on strong demand 
--RBI Malhotra: India econ robust on  sizeable buffers, policy reforms 
--RBI Malhotra:India econ, fincl system robust on healthy cos balance sheets 
--RBI Malhotra: India econ, fincl system remain robust on  benign inflation 
--RBI Malhotra: India econ, fincl system remain robust on strong growth 
--RBI Malhotra:New tech adding new layers of risk like stablecoins, pvt loan 
--RBI Malhotra:Global fincl system prone to high fincl cos interconnectedness 
--RBI Malhotra: Global fincl system vulnerable to expanding public debt 
--RBI Malhotra:Global fincl system prone to risk assets stretched valuations 
--RBI Malhotra: Global econ outlook for 2026, beyond shrouded in uncertainty
--RBI report:External vulnerability data show improvement despite trade risks 
--RBI report: Econ, fincl system have strong buffers to fight adverse shocks 
--RBI report: Sharp correction in US equities can tighten fincl conditions 
--RBI report: Sharp correction in US equities can impact domestic equities 
--RBI report: Geopolitical, trade issues can lower foreign investment 
--RBI report: Geopolitical, trade issues can dampen trade, cut corp earnings 
--RBI report: Geopolitical, trade issues can up exchange rate volatility 
--RBI report: Econ faces near-term risks from geopolitical, trade issues 
--RBI Report: Domestic fincl system remains sound on low market volatility 

 

NEW DELHI – India's 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, although near-term challenges from external spillovers remain, Reserve Bank of India Governor Sanjay Malhotra said Wednesday. Regulators and the government continue to build strong guardrails to safeguard the economy and the financial system from potential shocks, he said. 

 

"Despite a volatile and unfavourable external environment, the Indian economy is projected to register high growth, driven by strong domestic consumption and investment," Malhotra said in the bi-annual Financial Stability Report released Wednesday. This is in contrast to the global economy and financial system, which, he said, remain vulnerable to stretched valuations of risk assets, expanding public debt, and growing interconnectedness among banks and non-bank financial institutions.

 

The world economy has proved to be more resilient than expected and the financial system has remained steady, Malhotra said, adding that the outlook for 2026 and beyond is, however, shrouded in uncertainty. This is because the contours of policies that are reshaping the global economic landscape remain fluid and untested. Besides, profound technological advances globally and the continued rise of non-bank financial intermediation is making the financial landscape evolve rapidly. According to the central bank governor, while technological advances bring immense opportunities, they also add new layers of risk, like the rise of stablecoins and private credit.

 

Given these conditions, Malhotra said Indian banks and non-banking financial institutions remain healthy, bolstered by strong capital and liquidity buffers, robust earnings, and improved asset quality. Stress tests also endorse the resilience of banks and non-banking finance companies, he said. Financial markets, however, remain susceptible to global spillovers, he added.

 

"Maintaining financial stability and strengthening the financial system remains our north star," he said. "But financial sector regulators recognise that financial stability is not an end in itself." 

 

The Indian economy registered strong growth in the first half of the financial year 2025-26 (Apr-Mar) amid heightened uncertainties globally from geopolitical risks and trade-related issues. The GDP print for Apr-Sept was 8.0% and nominal GDP growth was 8.8%.

 

The risks, nonetheless, remain. They can increase exchange rate volatility, dampen trade, reduce corporate earnings, and lower foreign investment, according to the central bank. Additionally, a sharp correction in US equities can influence domestic equities and tighten financial conditions. 

 

"However, the economy and financial system have strong buffers to withstand adverse shocks," according to the report. "The domestic financial system remains sound, supported by strong balance sheets, easy financial conditions, and low market volatility." 

 

One of the key risks to the economy emerges from the lack of a trade deal with the US, India's top export destination, which has imposed steep tariffs on Indian goods. In August, the US imposed 50% tariff on goods imported from India, including a punitive tariff of 25% for New Delhi's continued purchases of crude oil from Russia. India has been batting for the trade agreement to shield its exports from the tariff, though the trajectory of India–US trade talks has fluctuated significantly over the past nine months.

 

"Notwithstanding the uncertainty surrounding the trade outlook, India's external vulnerability indicators remain robust and continue to show improvement," the central bank said.  End

 

Reported by Priyasmita Dutta

Edited by Rajeev Pai

 

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