Price stability is the RBI's legal target, but a central bank that ignored the health of banks and markets would soon find its monetary policy useless: rate changes cannot pass through a banking system that is too sick to lend. Financial stability is the RBI's second great job. It has no single number and no single law behind it. It is pursued through the Financial Stability and Development Council (FSDC), the half-yearly Financial Stability Report (FSR), a kit of macroprudential tools (capital buffers, risk weights, loan-to-value caps, extra capital for big banks), supervision through the Prompt Corrective Action (PCA) framework, and safety nets such as deposit insurance and the Insolvency and Bankruptcy Code (IBC). This part explains each, with the numbers from the latest FSR (June 2026) and the lessons of IL&FS, PMC Bank, Yes Bank and Lakshmi Vilas Bank.
This part assumes you know the RBI's functions in outline (Part 2) and how monetary policy works (Part 3). Bank regulation and NBFC rules in detail are in Part 18; the RBI's lender-of-last-resort and liquidity windows are in Part 11.
In the news
- 23 October 2026: 30th FSDC meeting. Finance Minister Nirmala Sitharaman chaired the 30th meeting of the FSDC in New Delhi, attended by RBI Governor Sanjay Malhotra and the heads of SEBI, IRDAI, PFRDA, IFSCA and IBBI. It reviewed financial-stability risks and discussed a financial-sector cyber security strategy, fintech and the tokenisation of financial assets. Why it matters for the exam: the FSDC is chaired by the Finance Minister, not the RBI Governor; the Governor chairs its Sub-Committee.
- 30 June 2026: Financial Stability Report, June 2026. The FSR found banks "safe and sound": gross NPAs at a multi-decadal low of 1.8% and CRAR at 17.7% in March 2026, with capital ratios staying above regulatory minimums even in adverse stress scenarios. Why it matters for the exam: the GNPA, CRAR and stress-test numbers from the latest FSR are standard current-affairs questions.
- 18 May 2026: CCyB still not activated. After reviewing its indicators, chiefly the credit-to-GDP gap, the RBI decided that "it is not necessary to activate CCyB at this point in time". Why it matters for the exam: the countercyclical capital buffer has existed since 2015 but has never been switched on.
- 1 April 2026: risk-based deposit insurance premium begins. Announced on 6 February 2026, the new DICGC framework lets safer banks pay less than the flat card rate of 12 paise per ₹100 of assessable deposits, with discounts of up to 33.33% for risk and up to 25% for vintage. Why it matters for the exam: the premium changed, but the cover is still ₹5 lakh per depositor per bank.
- 31 December 2025: Financial Stability Report, December 2025. The previous FSR said banks remained sound with strong capital and liquidity buffers and flagged stablecoins and stretched asset prices as global fragilities. Why it matters for the exam: the FSR is published twice a year, in June and December.
- 2 December 2025: D-SIB list for 2025. The RBI kept SBI (bucket 4, extra CET1 of 0.80%), HDFC Bank (bucket 2, 0.40%) and ICICI Bank (bucket 1, 0.20%) as domestic systemically important banks. Why it matters for the exam: bucket numbers and surcharges are asked almost every year.
What financial stability means
There is no statutory definition. In practice it means a financial system that can keep doing its basic jobs (taking deposits, making payments, lending, pricing risk) even when hit by a shock, without a chain of failures that harms the real economy. Three ideas sit behind the term:
- Resilience of institutions: banks and NBFCs have enough capital to absorb losses and enough liquid assets to meet withdrawals.
- Smooth functioning of markets and payments: money, bond and foreign exchange markets stay orderly; payment systems keep running.
- No build-up of systemic risk: risks that look small for one lender, such as fast growth in unsecured personal loans, do not pile up across the whole system.
The last point is why central banks distinguish microprudential supervision (is this bank safe?) from macroprudential policy (is the system safe?). The 2008 global crisis showed that every bank can look safe on its own while the system as a whole is fragile. Systemic risk has two dimensions:
- Time dimension (procyclicality): in booms, credit and asset prices feed each other; in busts the process runs in reverse. Tools that lean against the cycle, such as the CCyB, address this.
- Cross-sectional dimension (interconnectedness): the failure of a large or highly connected institution spreads losses to others. Extra capital for D-SIBs and limits on large exposures address this.
Monetary policy and financial stability usually point the same way, but not always. A low policy rate that supports growth can also inflate credit or asset prices. Using targeted tools (risk weights, LTV caps) lets the RBI cool a risky corner of the credit market without raising the repo rate for everyone; see Part 9 on transmission.
The institutional set-up
The FSDC
The Financial Stability and Development Council was set up by a government notification dated 30 December 2010, following the recommendation of the Raghuram Rajan Committee on Financial Sector Reforms (2008). It replaced the older High Level Coordination Committee on Financial Markets. It is the apex forum for financial stability, financial-sector development, inter-regulatory coordination, financial literacy and inclusion, and the macroprudential supervision of large financial conglomerates.
- Chair: the Union Finance Minister.
- Members: the RBI Governor; the chairs of SEBI, IRDAI, PFRDA, IFSCA and IBBI; the Secretaries of the Department of Economic Affairs, Department of Financial Services and Department of Revenue; the Secretary, Ministry of Electronics and IT; and the Chief Economic Adviser. The Minister of State for Finance also attends.
- Meetings: the council itself meets once or twice a year. The 29th meeting was held in Mumbai on 10 June 2025 and the 30th in New Delhi on 23 October 2026.
The FSDC Sub-Committee
The day-to-day work is done by the FSDC Sub-Committee, chaired by the RBI Governor. Its members include the Deputy Governors of the RBI, the heads of the other regulators and senior Finance Ministry officials. It meets more often than the council, monitors systemic risk, and its collective assessment is what the FSR publishes. It also has technical groups, for example on financial inclusion and financial literacy, and on early warning signals.
Inside the RBI
The RBI set up a Financial Stability Unit in 2009, later upgraded to the Financial Stability Department, which runs the macro stress tests, the Systemic Risk Survey and the network analysis published in the FSR. Supervision of banks, NBFCs and co-operative banks is done by the RBI's Department of Supervision, under the Board for Financial Supervision.
The Financial Stability Report
The RBI published its first FSR in March 2010 and has published it twice a year (June and December) since. The June 2026 issue is the 33rd. Each FSR has three chapters: macro-financial risks; the soundness and resilience of financial institutions (with stress tests); and regulatory initiatives.
Headline numbers, June 2026 FSR (data for March 2026)
| Indicator | Scheduled commercial banks |
|---|---|
| Gross NPA (GNPA) ratio | 1.8%, a multi-decadal low |
| Annual slippage ratio, 2025-26 | 1.2% |
| CRAR | 17.7%, a multi-decadal high |
| CET1 ratio | 15.3% |
| Baseline stress test | GNPA of 46 major banks rises only to about 1.9% by March 2028 |
| Adverse stress scenarios | GNPA rises to about 3.8% and 4.1%; aggregate capital stays above the minimum |
Outside banks, the FSR put the GNPA ratio of 174 major NBFCs at 2.4% in March 2026 (projected at 2.8% by March 2027 in the baseline) and that of urban co-operative banks at 5.2%. Life insurers' solvency ratios were above the 1.5 minimum. Global risks named in the report were elevated public debt, bond-market fragility, stretched asset valuations (including AI-linked stocks) and leveraged non-bank intermediaries. A dedicated survey of 33 banks and 10 upper-layer NBFCs ranked AI-enabled cyberattacks as the most important near-term challenge.
The long clean-up
The present numbers look so good partly because of how bad things were. After the RBI's Asset Quality Review of 2015–16 forced banks to recognise hidden bad loans, the GNPA ratio peaked at 11.6% in March 2018 (as first reported in the June 2018 FSR; later revisions put it at 11.5%). Public sector banks were worst hit: the 11 PSBs then under PCA had a GNPA ratio of 21%. Recognition, recapitalisation of PSBs, write-offs and IBC resolutions brought it down every year since.
Stress tests
A macro stress test asks: if GDP growth, inflation, interest rates and exchange rates moved to a bad scenario, what would happen to banks' NPAs and capital over the next one to two years? The RBI runs a baseline and two adverse scenarios (medium and severe) for the major banks, which hold most of the system's assets. It also runs sensitivity tests (a single shock, such as a jump in interest rates or the failure of the largest borrowers), liquidity stress tests and contagion analysis of the interbank network. The result reported in the headlines is whether aggregate CRAR, and how many individual banks, would stay above the 9% minimum.
The Systemic Risk Survey
The Systemic Risk Survey (SRS) is a half-yearly survey of experts and market participants (in banks, NBFCs, academia and industry) who rate the main risks to the financial system as high, medium or low, in five groups: global risks, macroeconomic risks, market risks, institutional risks and general risks (such as climate and cyber risk). It also asks how confident they are in the stability of the global and Indian financial systems. Its results are published as part of each FSR. It measures perceptions, not balance sheets, which makes it a useful early signal.
The macroprudential toolkit
Capital buffers
Under Basel III as applied in India, banks need a minimum CRAR of 9% (above the Basel minimum of 8%), of which CET1 of 5.5%. On top sit:
- Capital Conservation Buffer (CCB): 2.5% of risk-weighted assets (RWAs), in CET1, fully in force since 1 October 2021. A bank that dips into it faces limits on dividends. Minimum CRAR plus CCB is therefore 11.5%, and CET1 plus CCB is 8%.
- Countercyclical Capital Buffer (CCyB): a framework issued on 5 February 2015. It can range from 0 to 2.5% of RWAs, built up in a credit boom and released in a downturn. The main indicator is the credit-to-GDP gap (how far the credit-to-GDP ratio is above its long-run trend), used together with other indicators such as the GNPA ratio and industry outlook. Activation decisions are normally pre-announced so banks have time to build the buffer. It has never been activated; the latest review, on 18 May 2026, again found it unnecessary.
- D-SIB surcharge: extra CET1 for systemically important banks (below).
Risk weights
A risk weight decides how much capital a loan consumes. At 100%, a ₹100 loan counts as ₹100 of RWAs; at 125%, as ₹125. Raising risk weights on a fast-growing segment makes it costlier without touching interest rates for anyone else.
The clearest recent use came on 16 November 2023, when the RBI, worried about rapid growth in unsecured lending:
- raised the risk weight on banks' consumer credit (personal loans and similar, but not housing, education, vehicle or gold loans) from 100% to 125%, and on NBFCs' retail consumer credit to 125%;
- raised the risk weight on credit card receivables to 150% for banks (from 125%) and to 125% for NBFCs (from 100%);
- raised the risk weight on bank lending to NBFCs by 25 percentage points wherever the rating-based weight was below 100%.
Unsecured credit growth slowed sharply in 2024. On 25 February 2025 the RBI rolled back the NBFC part: from 1 April 2025 bank loans to NBFCs went back to the normal rating-based weights. It also cut the weight on microfinance loans that qualify as regulatory retail to 75% (100% for those classed as consumer credit). The 125% weight on consumer credit itself was not rolled back.
Borrower-based tools: LTV caps
Loan-to-value (LTV) caps limit how much a lender can lend against an asset, so a fall in its price does not wipe out the collateral. For housing loans, banks may lend at most 90% of the property value for loans up to ₹30 lakh, 80% for ₹30–75 lakh and 75% above ₹75 lakh. Lower risk weights are given for low-LTV housing loans. Gold loans are also subject to LTV caps.
Large exposures and interconnectedness
The Large Exposures Framework caps a bank's exposure to a single counterparty at 20% of Tier 1 capital (25% with Board approval) and to a group of connected counterparties at 25%. Limits on banks' interbank liabilities and the RBI's monitoring of the network of exposures between banks, NBFCs, mutual funds and insurers limit contagion.
Liquidity rules
The Liquidity Coverage Ratio (LCR) requires banks to hold high-quality liquid assets at least equal to their expected net outflows over 30 days of stress, and the Net Stable Funding Ratio (NSFR) requires stable funding for long-term assets. SLR holdings (Part 5) count towards the LCR within limits.
Domestic systemically important banks
Some banks are "too big to fail": their failure would damage the whole system, so markets assume the government would rescue them. That belief gives them cheaper funding and encourages risk-taking. The answer is to make them hold more capital and supervise them more closely.
The RBI's D-SIB framework was issued on 22 July 2014 (updated 28 December 2023). Banks are scored on size, interconnectedness, substitutability and complexity, and placed in one of five buckets with an extra CET1 requirement of 0.20% to 1.00% of RWAs, on top of the CCB. Names have been disclosed every year since 2015.
| Bank | Bucket | Extra CET1 |
|---|---|---|
| State Bank of India | 4 | 0.80% |
| HDFC Bank | 2 | 0.40% |
| ICICI Bank | 1 | 0.20% |
SBI was named a D-SIB in 2015, ICICI Bank in 2016 and HDFC Bank in 2017. In December 2023 SBI moved up from bucket 3 to 4 and HDFC Bank from bucket 1 to 2, with the higher surcharges applying from 1 April 2025. The 2025 list, released on 2 December 2025 with data for March 2025, kept all three in the same buckets. Foreign banks that are global systemically important banks (G-SIBs) and operate in India hold a proportionate surcharge on their Indian RWAs.
Prompt Corrective Action
The PCA framework lets the RBI step in early when a bank's financial health deteriorates, before it fails. It was introduced in December 2002, revised in April 2017 (when 11 public sector banks were placed under it) and revised again on 2 November 2021, effective 1 January 2022. It applies to all scheduled commercial banks, including foreign banks' branches, but not to small finance banks, payments banks or RRBs.
The current framework tracks three areas:
| Area | Indicator | Threshold 1 | Threshold 2 | Threshold 3 |
|---|---|---|---|---|
| Capital | CRAR (indicator 11.5%) | Up to 250 bp below | 250–400 bp below | More than 400 bp below |
| Capital | CET1 (indicator 8%) | Up to 162.5 bp below | 162.5–312.5 bp below | More than 312.5 bp below |
| Asset quality | Net NPA ratio | 6% to under 9% | 9% to under 12% | 12% or more |
| Leverage | Tier 1 leverage ratio | Up to 50 bp below the minimum | 50–100 bp below | More than 100 bp below |
The 2017 framework also used return on assets; the 2021 version dropped it. Mandatory actions grow with each threshold: at threshold 1, restrictions on dividends and a requirement for owners to bring in capital; at threshold 2, also limits on branch expansion; at threshold 3, also limits on capital spending. Discretionary actions range from special audits and changes of management to supersession of the board and, in the end, amalgamation. A bank leaves PCA only after four continuous quarters without a breach, one of them audited annual results, and to the RBI's satisfaction. Central Bank of India, the last of the 2017-era PSBs, came out of PCA in September 2022.
PCA is not a public punishment, but it does restrict growth, which is why it is unpopular with banks and governments. Its value is in forcing problems to be fixed early.
Crisis episodes: lessons from 2018 to 2020
IL&FS (2018)
Infrastructure Leasing & Financial Services, a large, highly rated infrastructure lender, began defaulting on its debt in mid-2018. In September 2018 group companies defaulted on loans and deposits, including obligations to SIDBI. The group's debt was about ₹94,000 crore. On 1 October 2018 the government moved the National Company Law Tribunal (NCLT), superseded the board and installed a new one led by Uday Kotak. The lesson was contagion through markets: mutual funds held IL&FS paper, the commercial paper market froze, and funding costs jumped for all NBFCs, especially housing finance companies (DHFL failed in 2019). It led to tighter NBFC regulation, the scale-based framework for NBFCs and powers for the RBI to supersede NBFC boards.
PMC Bank (2019)
Punjab and Maharashtra Co-operative Bank, a large multi-state urban co-operative bank, was found to have hidden loans to one borrower group, HDIL, of about ₹6,226 crore, roughly 73% of its loan book, using thousands of dummy accounts. The RBI imposed directions on 23 September 2019, at first capping withdrawals at ₹1,000 (raised in steps to ₹1 lakh). The bank was finally taken over by the new Unity Small Finance Bank from 25 January 2022. The lesson was the weakness of dual regulation of co-operative banks (by the RBI and the Registrar of Co-operative Societies). The Banking Regulation (Amendment) Act, 2020 brought co-operative banks much more fully under RBI supervision.
Yes Bank (2020)
Yes Bank, then one of India's larger private banks, had grown fast by lending to stressed corporates and had under-reported NPAs. On 5 March 2020 the government imposed a moratorium at the RBI's request, capped withdrawals at ₹50,000 a month, and the RBI superseded the board, appointing Prashant Kumar, former CFO of SBI, as administrator. Under the Yes Bank Reconstruction Scheme approved by the Cabinet on 13 March 2020, SBI invested ₹7,250 crore for a stake of about 48%, and other banks and financial institutions (ICICI Bank, HDFC Bank, Axis Bank and Kotak Mahindra Bank among them) also put in capital. The moratorium was lifted on 18 March 2020. The bank's Additional Tier 1 (AT1) bonds of ₹8,415 crore were written off, a step challenged in the courts. The lesson: a private bank can be rescued without a merger by a bail-in of creditors and a consortium of other lenders.
Lakshmi Vilas Bank (2020)
Lakshmi Vilas Bank, an old private bank in Tamil Nadu, had suffered losses and capital erosion for years and failed to find an investor. On 17 November 2020 it was placed under a 30-day moratorium (withdrawals capped at ₹25,000) and the RBI superseded the board. On 27 November 2020 it was amalgamated with DBS Bank India, the Indian subsidiary of Singapore's DBS. Shareholders' equity was written off; depositors were fully protected. The lesson: the RBI can resolve a bank in ten days through amalgamation under Section 45 of the Banking Regulation Act, even with a foreign-owned subsidiary.
Safety nets
Deposit insurance (DICGC)
The Deposit Insurance and Credit Guarantee Corporation, a wholly owned RBI subsidiary, insures deposits in all commercial banks (including foreign banks' branches, small finance banks, payments banks and RRBs) and co-operative banks.
- Cover: ₹5 lakh per depositor per bank, for principal and interest together, since 4 February 2020 (it was ₹1 lakh from 1993). Deposits held in the same right and capacity are added together; deposits in different banks are covered separately. The government has said it is reviewing a further increase, but as of October 2026 the limit is unchanged.
- Payout time: under the DICGC (Amendment) Act, 2021, depositors of a bank placed under RBI directions or a moratorium get their insured amount within 90 days.
- Not covered: deposits of the central and state governments, foreign governments, inter-bank deposits and some others.
- Premium: paid by banks, not depositors. Since 1 April 2026 it is risk-based: the card rate stays 12 paise per ₹100 of assessable deposits, but sounder banks pay less.
Deposit insurance limits panic: if most depositors know they are covered, there is little reason for a run. Since more than nine in ten deposit accounts are fully covered at ₹5 lakh, the cover protects most small savers even though it covers well under half of deposits by value.
The Insolvency and Bankruptcy Code (IBC)
The IBC, 2016 gave India a time-bound way to resolve failing companies. When a company defaults (on ₹1 crore or more since 2020), a financial or operational creditor can apply to the NCLT. A resolution professional takes over the company, and the committee of creditors votes on resolution plans. The process must finish within 180 days, extendable by 90, with an outer limit of 330 days including litigation (since a 2019 amendment). If no plan is approved, the company is liquidated. The code is administered by the Insolvency and Bankruptcy Board of India (IBBI), whose chair sits on the FSDC.
The RBI used the IBC to clean up banks. In June 2017 it directed banks to file cases against 12 large defaulters holding about a quarter of the system's gross NPAs. Its Prudential Framework for Resolution of Stressed Assets (7 June 2019) requires lenders to review a defaulted account within 30 days, sign an inter-creditor agreement and resolve it within 180 days, or make an extra 20% provision that pushes them towards the IBC. The IBC does not cover banks and insurers themselves: a failing bank is resolved under the Banking Regulation Act, as Yes Bank and Lakshmi Vilas Bank were.
Worked examples
Example 1: GNPA, NNPA and the provision coverage ratio
A bank has gross advances of ₹4,00,000 crore, gross NPAs of ₹9,200 crore and has set aside provisions of ₹6,900 crore against them.
- GNPA ratio = 9,200 ÷ 4,00,000 = 2.3%
- Net NPAs = 9,200 − 6,900 = ₹2,300 crore. Net advances = 4,00,000 − 6,900 = ₹3,93,100 crore.
- NNPA ratio = 2,300 ÷ 3,93,100 = 0.59%
- Provision coverage ratio (PCR) = 6,900 ÷ 9,200 = 75%
The NNPA ratio, not the GNPA ratio, is the PCA indicator. This bank is far from the 6% trigger.
Example 2: how a risk-weight hike uses up capital
A bank has ₹1,000 crore of personal loans. It must hold CRAR of 9% plus a CCB of 2.5% = 11.5% of RWAs.
- At a 100% risk weight: RWAs = ₹1,000 crore; capital needed = 11.5% × 1,000 = ₹115 crore.
- At 125% (after November 2023): RWAs = ₹1,250 crore; capital needed = 11.5% × 1,250 = ₹143.75 crore.
- Extra capital = ₹28.75 crore, a 25% increase, for exactly the same loans.
The bank must raise capital, earn a higher margin on such loans, or lend less. That is the purpose of the tool.
Example 3: the D-SIB surcharge
Suppose SBI's risk-weighted assets are ₹30 lakh crore (an illustrative round number). Its minimum CET1 requirement is:
- Base CET1 5.5% + CCB 2.5% + D-SIB surcharge 0.80% = 8.8% of RWAs
- The D-SIB part alone = 0.80% × ₹30,00,000 crore = ₹24,000 crore of extra common equity.
ICICI Bank, in bucket 1, adds only 0.20%, so its CET1 floor is 8.2%.
Example 4: which PCA threshold?
A bank reports CRAR of 10.2%, CET1 of 6.0% and a net NPA ratio of 4.8%.
- CRAR: 11.5 − 10.2 = 1.3 percentage points = 130 bp below → up to 250 bp → threshold 1.
- CET1: 8.0 − 6.0 = 200 bp below → more than 162.5 but not over 312.5 bp → threshold 2.
- NNPA 4.8% is below 6% → no breach.
A breach of either capital indicator counts, and the worse one decides: the bank falls in threshold 2, so it faces restrictions on dividends and branch expansion, and its owners must bring in capital.
Example 5: how much is insured?
A depositor has ₹3,50,000 in a savings account and an FD of ₹2,50,000 (including interest) in Bank A, both in her own name, and ₹2,00,000 in Bank B. Bank A fails.
- Bank A: 3,50,000 + 2,50,000 = ₹6,00,000, but cover is capped at ₹5,00,000. ₹1,00,000 is at risk.
- Bank B: unaffected, and covered separately up to ₹5 lakh if it ever failed.
Splitting money across banks, not across accounts in one bank, is what widens protection.
Common exam traps
- FSDC chair vs Sub-Committee chair. The Finance Minister chairs the FSDC; the RBI Governor chairs the Sub-Committee.
- The FSR is half-yearly, published in June and December. It is not the Monetary Policy Report (April and October) or the Report on Trend and Progress of Banking (annual, December).
- CCyB has never been activated. Questions that assume a current CCyB rate are wrong.
- The 2025 rollback covered bank loans to NBFCs (and microfinance), not the 125% weight on consumer credit.
- D-SIB buckets: SBI is in bucket 4, not 5; bucket 5 is empty. HDFC Bank is in 2, ICICI Bank in 1.
- PCA indicators are CRAR/CET1, net NPA and leverage. Return on assets was dropped in 2021.
- ₹5 lakh covers principal and interest together, per depositor per bank, not per account.
- The IBC does not apply to banks. Banks are resolved under the Banking Regulation Act (Yes Bank, LVB).
- GNPA peak: 11.6% in March 2018 as first reported (11.5% after revision); a figure of about 11.2% sometimes quoted for 2017-18 comes from a different data set. Use the FSR figure unless the options suggest otherwise.
Key facts at a glance
| FSDC | Set up 30 December 2010; chaired by the Finance Minister |
| FSDC Sub-Committee | Chaired by the RBI Governor; its assessment is published as the FSR |
| Latest FSDC meeting | 30th, New Delhi, 23 October 2026 |
| Financial Stability Report | Half-yearly (June, December) since March 2010; June 2026 is the latest |
| GNPA ratio, March 2026 | 1.8% (peak 11.6% in March 2018) |
| CRAR, March 2026 | 17.7%; CET1 15.3% |
| Minimum CRAR | 9% + CCB 2.5% = 11.5% |
| CCyB | Framework 5 February 2015; 0–2.5% of RWAs; never activated (review of 18 May 2026) |
| D-SIBs 2025 | SBI bucket 4 (0.80%), HDFC Bank bucket 2 (0.40%), ICICI Bank bucket 1 (0.20%) |
| Consumer credit risk weight | 125% since 16 November 2023 (banks) |
| NBFC lending risk weight | November 2023 hike reversed from 1 April 2025 |
| PCA framework | Revised 2 November 2021, effective 1 January 2022 |
| Deposit insurance | ₹5 lakh per depositor per bank since 4 February 2020; payout within 90 days |
| DICGC premium | Risk-based from 1 April 2026; card rate 12 paise per ₹100 |
| IBC | 2016; 180 + 90 days; 330-day outer limit |
Exam corner: what to remember
- The FSDC (2010, Rajan Committee) is chaired by the Finance Minister; its Sub-Committee by the RBI Governor. The 30th meeting was on 23 October 2026.
- The FSR is half-yearly. June 2026: GNPA 1.8%, CRAR 17.7%, CET1 15.3%, slippage 1.2%; NBFC GNPA 2.4%; adverse-scenario GNPA 3.8–4.1%.
- Macroprudential tools: CCB, CCyB, D-SIB surcharge, risk weights, LTV caps, large-exposure limits, LCR/NSFR.
- CCyB: 0–2.5%, credit-to-GDP gap, never activated.
- D-SIBs: SBI 4 (0.80%), HDFC Bank 2 (0.40%), ICICI 1 (0.20%).
- November 2023: consumer credit 100% → 125%; cards 125% → 150% (banks); bank loans to NBFCs +25 pp. February 2025: NBFC part reversed from 1 April 2025.
- PCA: CRAR/CET1, NNPA, leverage; three thresholds; exit after four clean quarters.
- Crises: IL&FS (Sept–Oct 2018), PMC Bank (23 Sept 2019), Yes Bank (5 March 2020), LVB (17 Nov 2020, merged with DBS Bank India on 27 Nov 2020).
- DICGC: ₹5 lakh, 90 days, risk-based premium from April 2026.
- IBC: 2016, NCLT, committee of creditors, 330 days; not for banks.
Test yourself
Who chairs the Sub-Committee of the Financial Stability and Development Council?
Show answer
Answer: (b) The Finance Minister chairs the FSDC itself; its Sub-Committee is chaired by the RBI Governor.
According to the RBI's Financial Stability Report of June 2026, the gross NPA ratio of scheduled commercial banks in March 2026 was:
Show answer
Answer: (c) The June 2026 FSR put it at a multi-decadal low of 1.8%; 2.3% was March 2025 and 2.8% March 2024.
In the RBI's 2025 list of D-SIBs, HDFC Bank is placed in bucket:
Show answer
Answer: (b) HDFC Bank is in bucket 2 with an extra CET1 of 0.40%; SBI is in bucket 4 and ICICI Bank in bucket 1.
The main indicator used by the RBI to decide on activating the countercyclical capital buffer is:
Show answer
Answer: (b) The credit-to-GDP gap is the main indicator, used with supplementary indicators; the CCyB has not been activated so far.
Which of these is NOT an indicator in the RBI's revised PCA framework for scheduled commercial banks (effective 1 January 2022)?
Show answer
Answer: (d) Return on assets was used in the 2017 framework but dropped in the 2021 revision.
A bank has gross advances of ₹2,00,000 crore, gross NPAs of ₹5,000 crore and provisions of ₹3,750 crore against them. Its provision coverage ratio is:
Show answer
Answer: (c) PCR = 3,750 ÷ 5,000 = 75%. (Its GNPA ratio is 5,000 ÷ 2,00,000 = 2.5%.)
A bank holds ₹400 crore of personal loans. If the risk weight rises from 100% to 125% and the bank must hold total capital of 11.5% of risk-weighted assets, the extra capital needed is:
Show answer
Answer: (b) RWAs rise from ₹400 crore to ₹500 crore; 11.5% × ₹100 crore = ₹11.5 crore.
Lakshmi Vilas Bank was amalgamated in November 2020 with:
Show answer
Answer: (c) It was merged with DBS Bank India on 27 November 2020; PMC Bank went to Unity Small Finance Bank.
From 1 April 2026, the DICGC moved to a risk-based premium. The deposit insurance cover per depositor per bank is now:
Show answer
Answer: (b) The cover is still ₹5 lakh (since 4 February 2020); only the way the premium is charged changed.
In February 2025 the RBI reversed the November 2023 increase in risk weights on:
Show answer
Answer: (c) Bank lending to NBFCs went back to rating-based risk weights from 1 April 2025; the 125% weight on consumer credit stayed.
Further reading
- RBI, Financial Stability Report, June 2026: the latest full report, with stress tests, the risk survey and chapter-wise data. The overview alone is worth the time.
- RBI, Financial Stability Reports archive: every FSR since 2010; comparing the June 2018 and June 2026 issues shows the clean-up in numbers.
- RBI, Prompt Corrective Action Framework for Scheduled Commercial Banks, 2 November 2021: the full PCA matrix, mandatory and discretionary actions, and exit rules.
- RBI, 2025 list of D-SIBs, 2 December 2025: the bucket table and the history of the D-SIB framework on one page.
- RBI, Risk-based Premium Framework for Deposit Insurance, 6 February 2026: how DICGC now prices deposit insurance and which banks are excluded.
- RBI, Regulatory measures towards consumer credit and bank credit to NBFCs, 16 November 2023: a textbook example of a targeted macroprudential measure.
- Insolvency and Bankruptcy Board of India: the IBC, its regulations and the quarterly newsletter with up-to-date numbers on cases admitted, resolved and liquidated.
- RBI Annual Report 2025-26: the chapters on regulation and supervision summarise the year's macroprudential and resolution measures. Also worth reading: Viral Acharya, Quest for Restoring Financial Stability in India (SAGE, 2020), a former Deputy Governor's account of the NPA crisis, PCA and the IBC.
Sources
- The Tribune (ANI), 23 October 2026: 30th FSDC meeting in New Delhi chaired by the Finance Minister; attendees; FSDC set up by notification of 30 December 2010; Sub-Committee chaired by the RBI Governor (accessed 24 October 2026)
- Zee Business, October 2026: topics at the 30th FSDC meeting: financial stability, cyber security strategy, fintech, tokenisation (accessed 24 October 2026)
- The Tribune, June 2025: 29th FSDC meeting in Mumbai, 10 June 2025 (accessed 24 October 2026)
- RBI press release, FSR June 2026, 30 June 2026: FSR reflects the FSDC Sub-Committee's assessment; banks safe and sound; stress tests; NBFCs; insurers; global risks (accessed 24 October 2026)
- PSU Watch, 30 June 2026: GNPA 1.8% in March 2026; baseline 1.9% by March 2028; adverse 3.8% and 4.1%; slippage 1.2%; NBFC GNPA 2.4% and 2.8%; UCB GNPA 5.2%; AI-enabled cyberattacks (accessed 24 October 2026)
- The Week, 13 July 2026: CRAR 17.7% and CET1 15.3% in March 2026 (accessed 24 October 2026)
- RMA India, July 2026: survey of 33 banks and 10 upper-layer NBFCs; household debt (accessed 24 October 2026)
- RBI, Financial Stability Reports page: release dates of the June 2026 and December 2025 FSRs (accessed 24 October 2026)
- RBI press release, FSR December 2025, 31 December 2025: December 2025 FSR highlights (accessed 24 October 2026)
- RBI press release, June 2018 FSR and The Quint, June 2018: GNPA 11.6% and CRAR 13.5% in March 2018; 11 PSBs under PCA with GNPA of 21% (accessed 24 October 2026)
- RBI, FSR December 2019: GNPA 9.3% and CRAR 14.3% in March 2019 (accessed 24 October 2026)
- RBI press release, FSR July 2020: GNPA 8.5% and CRAR 14.8% in March 2020 (accessed 24 October 2026)
- RBI press release, FSR July 2021: GNPA 7.48% and CRAR 16.03% in March 2021 (accessed 24 October 2026)
- RBI press release, FSR June 2022: GNPA 5.9% and CRAR 16.7% in March 2022 (accessed 24 October 2026)
- RBI press release, FSR June 2023: GNPA 3.9%, CRAR 17.1%, CET1 13.9% in March 2023 (accessed 24 October 2026)
- RBI press release, FSR June 2024: GNPA 2.8%, NNPA 0.6%, CRAR 16.8%, CET1 13.9% in March 2024 (accessed 24 October 2026)
- RBI, FSR June 2025 and Outlook Money, June 2025: CRAR 17.3% and GNPA 2.3% in March 2025 (accessed 24 October 2026)
- RBI press release, Review of Requirement of CCyB, 18 May 2026: CCyB not activated; credit-to-GDP gap; decisions normally pre-announced (accessed 24 October 2026)
- RBI press release, 2025 list of D-SIBs, 2 December 2025: buckets and surcharges; framework of 22 July 2014 updated 28 December 2023; data as of 31 March 2025; G-SIB surcharge (accessed 24 October 2026)
- Business Standard, 28 December 2023: SBI and HDFC Bank moved up a bucket, higher surcharges from 1 April 2025 (accessed 24 October 2026)
- RBI circular, Regulatory measures towards consumer credit and bank credit to NBFCs, 16 November 2023: consumer credit to 125%, card receivables to 150% (banks) and 125% (NBFCs), bank credit to NBFCs +25 pp (accessed 24 October 2026)
- RBI circular, Review of Risk Weights on Microfinance Loans, 25 February 2025 and Conventus Law digest, March 2025: microfinance risk weights of 75% and 100%; NBFC risk weights restored to rating-based levels from 1 April 2025 (accessed 24 October 2026)
- CAalley, 2025: unsecured personal loans continue at 125% (accessed 24 October 2026)
- RBI circular, PCA Framework for Scheduled Commercial Banks, 2 November 2021: indicators, thresholds, mandatory and discretionary actions, exit criteria, effective 1 January 2022 (accessed 24 October 2026)
- RBI press release, Risk-based Premium Framework for Deposit Insurance, 6 February 2026: effective 1 April 2026; card rate 12 paise per ₹100; Tier 1 and Tier 2 models; incentives of up to 33.33% and 25% (accessed 24 October 2026)
- Business Standard, 4 February 2020: deposit insurance raised to ₹5 lakh from 4 February 2020 (accessed 24 October 2026)
- Business Standard, February 2025: government reviewing a proposal to raise the cover (accessed 24 October 2026)
- RBI press release, Lakshmi Vilas Bank placed under moratorium, 17 November 2020: 30-day moratorium, directions under Section 35A, amalgamation scheme (accessed 24 October 2026)
- Wikipedia, Lakshmi Vilas Bank: merger with DBS Bank India on 27 November 2020 (accessed 24 October 2026)
- Wikipedia, Yes Bank: moratorium of 5 March 2020, ₹50,000 limit, Prashant Kumar, reconstruction scheme of 13 March 2020, operations resumed 18 March 2020, AT1 write-down of ₹8,415 crore (accessed 24 October 2026)
- Wikipedia, Punjab & Maharashtra Co-operative Bank and RBI press release, 5 November 2019: directions of 23 September 2019, withdrawal limits, HDIL exposure of ₹6,226 crore, merger with Unity SFB on 25 January 2022 (accessed 24 October 2026)
- Wikipedia, IL&FS: defaults of September 2018, government takeover of 1 October 2018, new board, ₹94,000 crore debt (accessed 24 October 2026)