The Reserve Bank of India's latest Financial Stability Report (FSR) presents a mixed picture of the Indian financial landscape. While declaring the Indian economy remains robust and resilient with a positive economic outlook, the RBI has flagged several emerging risks. The banking sector demonstrates strength with improved asset quality and robust profitability, yet concerns persist around unsecured lending, fintech exposure, external uncertainties, and the emerging threat of stablecoins. The report cautioned that geopolitical and trade-related uncertainties pose near-term risks to financial stability.
Slippages in unsecured retail loans constituted 53.1 per cent of the total retail loan slippages of Scheduled Commercial Banks (SCBs) as of September-end 2025, according to the latest Financial Stability Report (FSR). This represents an increase from 51.9 per cent recorded in September-end 2024. The RBI has specifically flagged the rise in unsecured loan books of banks, which have been driving retail slippages. More than half of retail loan slippages are coming from unsecured products such as personal loans and credit cards. Despite aggregate asset quality remaining stable with GNPA ratio at 1.8 per cent vis-à-vis 1.1 per cent for retail advances, the concentration of slippages in unsecured lending has heightened concerns.
As of September-end 2025, slippage ratios in unsecured retail lending varied significantly across bank categories. Public sector banks (PSBs) recorded the lowest slippage ratio at 1.4 per cent, followed by private sector banks (PVBs) at 4.7 per cent, foreign banks at 6.8 per cent, and small finance banks at 10.4 per cent. According to the FSR, among bank groups, the share of PVBs in fresh slippages of unsecured loans was higher, and their write-offs continue to remain elevated.
The FSR noted that growth in bank lending to NBFCs (non-banking finance companies) and unsecured retail, in which risk weights were increased in November 2023, is showing signs of revival. Bank lending to NBFCs recorded 8.5 per cent year-on-year growth, while unsecured retail lending grew 6.2 per cent year-on-year as of September-end 2025. Significantly, fintech lending experienced explosive growth of 36.1 per cent between September 2024 and September 2025, driven largely by personal loans. Among different product types, gold loans witnessed sharp growth across SCBs and NBFCs, forming 5.8 per cent of total advances of SCBs and NBFCs.
The RBI has issued a stark warning about the risks posed by stablecoins to India's financial stability. The central bank cautioned that widespread adoption of stablecoins could pose significant risks to the nation's monetary sovereignty and financial stability. Foreign currency-denominated stablecoins could erode monetary control, weaken monetary policy transmission, and complicate capital flow management, particularly for emerging economies like India. The RBI blamed the rupee's weakening on trade and capital flow pressures, noting it depreciated against the dollar due to falling terms of trade, high tariffs, and a slowdown in capital flows. The rupee closed 2025 as the worst Asian unit, losing over 5% and closing over 90.
With slippages increasing in unsecured retail lending, PVBs resorted to write-offs in a significant manner even as recoveries remained muted, as reported by the FSR. Hari Hara Mishra, CEO, Association of ARCs in India, explained that during the high growth period of unsecured loans, particularly small ticket loans and borrowers with multiple loans, the rigour of credit underwriting standards had become diluted. According to the FSR, the share of outstanding loans held by below prime borrowers in the NBFCs' gold loan portfolio reduced but remained sizeable at 56.8 per cent. In the case of both banks and NBFCs, the outstanding loans held by higher quality borrowers dominated the unsecured business loans category, comprising 69.1 per cent and 68.6 per cent, respectively.