A sharp correction in US stocks could impact domestic equities and tighten financial conditions. However, the economy and financial system have strong buffers to withstand negative shocks, the report said.
RBI, on the other hand, said the Indian economy and financial system remain robust and resilient, supported by strong growth, mild inflation, healthy balance sheets of financial and non-financial companies, sizeable buffers and prudent policy reforms.
Despite a volatile and unfavorable external environment, the Indian economy is expected to post high growth, driven by strong domestic consumption and investment.
Nevertheless, the RBI report said it recognizes the challenges of short-term external spillovers and continues to build strong guardrails to protect the economy and financial system from potential shocks.
The year 2025 was challenging as geopolitical conflicts, trade tensions and persistent policy uncertainty cast a shadow over the global economy and financial system.
Amid these developments, the global economy has proven more resilient than expected and the financial system has remained stable.
However, the outlook for 2026 and beyond is shrouded in uncertainty as the contours of policies reshaping the global economic landscape remain fluid and untested.
In this challenging context, the global financial system remains vulnerable to the high valuations of risky assets, growing public debt and the increasing interconnectedness between banks and non-bank financial institutions (NBFIs).
In addition, the financial landscape is rapidly evolving, driven by profound technological advances and the continued rise of non-bank financial intermediation. While they bring enormous opportunities, they also add new layers of risk, such as the rise of stablecoins and private credit, the report said.
Published on December 31, 2025
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