Can your debt mutual fund withstand liquidity pressure? Here's what the RBI financial stability report reveals

The Reserve Bank of India's (RBI) stress tests of mutual funds found that 44 open-ended debt mutual fund schemes, managing assets worth ₹3.18 lakh crore, breached liquidity thresholds prescribed by the AMFI or their respective asset management companies (AMCs) in March 2026.

The findings were published on Tuesday (30 June 2026) in the central bank's latest Financial Stability Report.

The central bank, however, noted that there is no immediate cause for concern. According to the report, all the affected mutual funds have either rectified the breaches or initiated remedial measures and are expected to complete the same within the prescribed timeframe.

The findings form part of the RBI's broader assessment of India's financial system, which concluded that the overall financial sector remains resilient despite heightened global uncertainties.

“Results of stress tests of mutual funds revealed that in March 2026, 44 open-ended debt schemes with total assets under management (AUM) of 3.18 lakh crore breached the AMFI or AMC prescribed thresholds (Table 2.10). In this respect, all the MFs have either cured the breach or reported initiation of remedial action and are expected to complete the same in the prescribed timeframe,” RBI said in the report.

What does a stress test mean?

Stress testing is a technique used to assess how well financial institutions and investment portfolios can withstand adverse financial or market conditions, such as a market crash or spike in unemployment.

It helps regulators and financial firms evaluate potential investment risks, determine whether assets are adequate to absorb losses, and identify areas where risk management or internal controls may need improvement.

What did the RBI's stress test assess?

As part of its assessment, the apex bank evaluated the liquidity risk management of open-ended debt mutual fund schemes by calculating two key liquidity indicators, which are as follows:

• Redemption at Risk ((LR-RaR)
• Conditional Redemption at Risk ((LR-CRaR)

The analysis covered the top 10 asset management companies (AMCs), based on assets under management (AUM) across 13 categories of open-ended debt schemes as at the end of March 2026.

“Both the ratios were found well above the respective threshold limits for most of the MFs. A few instances of the ratios breaching the threshold limits were addressed by the respective AMCs in a timely manner,” RBI noted in the report.

Note: The number of schemes which breached the respective prescribed thresholds for interest rate risk, credit risk and liquidity risk is 22, 22 and seven, respectively, while the total number of unique schemes which breached any of the prescribed thresholds is 44, the central bank clarified in the report.

RBI says India's financial system remains resilient amid global shocks

RBI said India’s financial system remained resilient despite global uncertainty, supported by strong macroeconomic fundamentals that acted as a buffer. However, it cautioned that recurring external shocks could tighten financial conditions, affect the country's growth outlook and pose risks to the domestic financial stability.

“The global financial system has displayed resilience despite successive shocks in the recent past. The financial markets, which elicited strong initial reactions at the onset of the war, have since become more sanguine. A combination of lower- than-anticipated rise in oil futures price, strong corporate earnings, the artificial intelligence (AI) driven boom, and supportive financial conditions has underpinned market optimism and kept volatility contained,” RBI said.

In the report, RBI also warned that the Indian economy continues to face risks from volatile energy prices. “The rebuilding of inventories by countries could keep energy prices relatively elevated even as supply chain normalisation gains pace.”

According to the apex bank, India is still the fastest-growing major economy supported by domestic demand, even as inflation remains within target.

“The balance sheet of banks and non-banks remains robust with adequate capital and liquidity buffers, limiting the risk of financial shocks spilling over to the real economy,” it said.