India's central bank sees CBDCs as a solution to growing financial risks

The Reserve Bank of India (RBI) has sent a clear signal in its latest Stability Report: countries that seriously engage in the development of CBDCs can significantly contribute to safeguarding their financial stability. The background of this recommendation is noteworthy – while the traditional banking sector is becoming more stable, significant cracks are appearing elsewhere in the system.

Diverging Trends in Credit Risk

The figures paint a divided picture: in the conventional banking sector, the non-performing loan ratio is expected to improve to 1.9% by the fiscal year 2026-27 – a decrease from 2.1% in September 2025. However, this positive development stands in stark contrast to the situation with non-bank financial institutions (NBFCs), where default rates are rising sharply.

For NBFCs, an increase in non-performing loans from 2.3% to 2.9% is forecasted. This development signals growing risks in a sector that provides an important source of financing for many borrowers outside the traditional banking system.

Stablecoins as a Latent Threat to Macro Stability

The RBI also explicitly warns against stablecoins and their impact on overall economic stability. These digital assets could, if their market penetration continues to grow, cause significant macroeconomic disruptions – a risk that has been underestimated so far.

CBDCs as a Counterbalance to Uncontrolled Crypto Assets

In this context, centrally issued digital currencies – CBDCs – are gaining importance. Unlike decentralized cryptocurrencies and stablecoins, CBDCs provide authorities with the necessary control mechanisms to effectively shape monetary policy and minimize systemic risks. The RBI positions itself as a proponent of a controlled digital currency system that enables innovation without jeopardizing financial security.