Can your debt mutual fund withstand liquidity pressure? Here's what the RBI financial stability report reveals
The Reserve Bank of India’s latest stress tests on mutual funds found that, in March 2026, 44 open-ended debt schemes with combined assets of ₹3.18 lakh crore failed to meet liquidity thresholds set either by AMFI or by their own asset management companies.
These results were released on 30 June 2026 in the central bank’s Financial Stability Report.
Despite these breaches, the RBI stated that there is no immediate reason for alarm. The report notes that all the impacted schemes have already corrected the breaches or started corrective steps and are expected to complete these measures within the stipulated timelines.
These observations are part of the RBI’s wider review of India’s financial system, which concludes that the sector as a whole remains robust even amid elevated global uncertainty.
According to the report, “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.”
What is a stress test?
Stress testing is a risk assessment method used to gauge how financial institutions and portfolios would cope with severe but plausible adverse scenarios, such as a sharp market correction or a surge in unemployment.
It enables regulators and firms to understand potential vulnerabilities, check whether available capital and assets can absorb losses, and pinpoint where risk management practices or internal controls may need strengthening.
What exactly did the RBI examine?
For this exercise, the RBI focused on liquidity risk management in open-ended debt mutual fund schemes. It did so by computing two main liquidity indicators:
• Redemption at Risk (LR-RaR)
• Conditional Redemption at Risk (LR-CRaR)
The study covered the 10 largest AMCs by AUM, across 13 categories of open-ended debt schemes as of end-March 2026.
The RBI observed that “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.”
Stress test results for open-ended debt schemes (March 2026)
The data show that 2 AMCs had schemes breaching thresholds and 8 AMCs had none, making a total of 10 AMCs. In terms of schemes, 44 schemes breached at least one threshold, while 282 did not, out of 326 schemes in all. The AUM of schemes with breaches was ₹3.18 lakh crore, compared with ₹13.07 lakh crore for those without breaches, totalling ₹16.25 lakh crore. (Source: SEBI)
The RBI clarified that 22 schemes breached interest rate risk thresholds, 22 breached credit risk thresholds, and 7 breached liquidity risk thresholds, with 44 being the total number of unique schemes that failed at least one of these prescribed limits.
RBI’s view on overall financial stability
The central bank reiterated that India’s financial system has stayed resilient despite global headwinds, supported by strong domestic macroeconomic fundamentals. At the same time, it warned that repeated external shocks could tighten financial conditions, weigh on growth prospects, and create risks for domestic financial stability.
It noted that the global financial system has also held up through multiple recent shocks. Initial sharp market reactions at the start of the war have moderated, with sentiment supported by a smaller-than-feared rise in oil futures, solid corporate earnings, an AI-driven market rally, and generally accommodative financial conditions that have kept volatility in check.
The RBI cautioned that India still faces exposure to swings in energy prices. It pointed out that restocking of energy inventories by various countries could keep prices relatively high, even as supply chains continue to normalise.
The report also highlights that India remains the fastest-growing major economy, driven largely by domestic demand, while inflation stays within the target band.
It concludes that bank and non-bank balance sheets are strong, with sufficient capital and liquidity buffers, which helps prevent financial sector shocks from spilling over into the broader real economy.
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