RBI releases the Financial Stability Report, June 2025

**Executive Summary** This press release from the Reserve Bank of India (RBI), dated June 30, 2025, announces the release of the June 2025 Financial Stability Report (FSR). The FSR reflects the collective assessment of the Sub-Committee of the Financial Stability and Development Council (FSDC) on the resilience of the Indian financial system and risks to financial stability. The report highlights key factors impacting financial stability. **Key Points / Main Content** *Global Economy and Financial Markets* * Elevated economic and trade policy uncertainties are testing the resilience of the global economy and the financial system. * Financial markets remain volatile, especially core government bond markets, driven by shifting policy and geopolitical environment. Existing vulnerabilities such as soaring public debt levels and elevated asset valuations have the potential to amplify fresh shocks. *Indian Economy* * Despite an uncertain and challenging global economic backdrop, the Indian economy remains a key driver of global growth, underpinned by sound macroeconomic fundamentals and prudent macroeconomic policies. * The domestic financial system exhibits resilience, fortified by healthy balance sheets of banks and non-banks. Financial conditions have eased, supported by accommodative monetary policy and low volatility in financial markets. The strength of corporate balance sheets lends support to overall macroeconomic stability. *Banking and Financial Sector* * The soundness and resilience of Scheduled Commercial Banks (SCBs) are bolstered by robust capital buffers, multi-decadal low non-performing loans ratio, and strong earnings. * Macro stress test results affirm that most SCBs have adequate capital buffers relative to the regulatory minimum even under adverse stress scenarios. Stress tests also validate the resilience of mutual funds and clearing corporations. * Non-Banking Financial Companies (NBFCs) remain healthy with sizable capital buffers, robust earnings and improving asset quality. * The consolidated solvency ratio of the insurance sector remains above the minimum threshold limit. **Impact Analysis** **Stakeholder: Banks (Scheduled Commercial Banks - SCBs)** * **Impact**: The report affirms the soundness and resilience of SCBs due to robust capital buffers, low non-performing loans, and strong earnings. Macro stress tests validate adequate capital buffers even under adverse conditions. * **Action Required**: Maintain current capital buffer levels, loan quality, and earnings performance to ensure continued resilience. **Stakeholder: Non-Banking Financial Companies (NBFCs)** * **Impact**: The report indicates that NBFCs remain healthy with sizable capital buffers, robust earnings, and improving asset quality. * **Action Required**: Continue to maintain capital adequacy, improve asset quality, and ensure robust earnings. **Stakeholder: Insurance Sector** * **Impact**: The consolidated solvency ratio of the insurance sector remains above the minimum threshold limit. * **Action Required**: Maintain solvency ratios above the minimum threshold limit. **Stakeholder: Mutual Funds and Clearing Corporations** * **Impact**: Stress tests validate the resilience of mutual funds and clearing corporations. * **Action Required**: Maintain resilience to continue to withstand adverse stress scenarios.

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