The Reserve Bank of India released its December 2025 Financial Stability Report on Wednesday, affirming that India's financial system maintains resilience and stability despite an uncertain global economic environment characterized by elevated risks and market volatility. The comprehensive assessment represents the collective evaluation of the Sub-Committee of the Financial Stability and Development Council regarding systemic risks to financial stability.

Global Economic Landscape Shows Mixed Signals

The RBI acknowledged that the global economy has demonstrated resilience, bolstered by fiscal measures, front-loaded trade activity, and robust investment linked to artificial intelligence developments. However, the central bank cautioned about persistent downside risks stemming from heightened uncertainty, elevated public debt levels, and potential disorderly corrections in financial markets.

According to the report, global financial markets present a paradox of surface strength masking underlying vulnerabilities. The sharp increase in equity and risk asset prices, combined with the expanding role of non-bank financial intermediaries and their growing interconnectedness with traditional banks, has contributed to global financial fragilities. The rise of stablecoins adds another layer of complexity to the evolving financial landscape.

Indian Economy Demonstrates Continued Strength

Against this global backdrop, the RBI emphasized that India's economy continues expanding at a healthy pace, supported by strong domestic demand, benign inflation trends, and prudent macroeconomic policies. The domestic financial system maintains its robust and resilient character, aided by strong balance sheets, accommodative financial conditions, and low market volatility.

Banking Sector Maintains Sound Financial Health

The central bank reported that scheduled commercial banks continue to exhibit sound financial health, characterized by strong capital and liquidity buffers, improved asset quality metrics, and robust profitability performance. Macro stress test results demonstrated that banks are well-positioned to absorb potential losses under hypothetical adverse scenarios while maintaining capital levels significantly above regulatory requirements.

The stress testing framework also confirmed the resilience of mutual funds and clearing corporations, indicating broad-based stability across different segments of the financial system. Non-banking financial companies maintain their resilient positioning, supported by adequate capital buffers, stable earnings performance, and improving asset quality indicators.

Insurance Sector Stability Reinforces System Strength

The insurance sector continues to demonstrate stability, with the consolidated solvency ratio remaining above the prescribed minimum threshold. This performance reinforces the overall strength of India's financial ecosystem and provides additional confidence in the system's ability to weather potential challenges.

Despite the positive assessment, the RBI acknowledged that near-term risks from geopolitical tensions and trade-related uncertainties remain present, requiring continued vigilance and prudent risk management across the financial system.

The Reserve Bank of India announced on December 30 that it will conduct an Open Market Operations (OMO) purchase of government securities worth ₹50,000 crore on January 5, 2026. This initiative forms part of the central bank's broader strategy to inject durable liquidity into the banking system through systematic market interventions.

Securities Covered in January 5 Auction

The upcoming OMO will include seven government securities with varying maturity periods and coupon rates:

Auction Process and Requirements

Eligible participants must submit their bids electronically through the RBI's Core Banking Solution (E-Kuber) platform. Physical offers will only be accepted in case of system failure, ensuring operational continuity. The central bank will announce results on the same day as the auction, maintaining transparency in the process.

Successful participants face a strict timeline requirement - securities must be credited to their Subsidiary General Ledger (SGL) account by 12 noon on January 6, 2026.

Recent OMO Performance

The December 29 OMO purchase demonstrated strong market participation across multiple securities:

Notably, bids for the 7.18% GS 2037 security were not accepted during this operation.

Comprehensive Liquidity Framework

On December 23, the RBI outlined an extensive liquidity management plan encompassing OMO purchases and USD/INR buy/sell swaps. The programme includes four OMO tranches of ₹50,000 crore each, scheduled for December 29, January 5, January 12, and January 22, collectively totaling ₹2 lakh crore in liquidity injection.