RBI releases the Financial Stability Report, June 2025

**Executive Summary** The Reserve Bank of India (RBI) released the June 2025 Financial Stability Report (FSR) on June 30, 2025. The report 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. **Key Points / Main Content** *Global Economic Resilience* * Elevated economic and trade policy uncertainties are testing the resilience of the global economy and the financial system. * Financial markets remain volatile due to shifting policy and geopolitical environment, with existing vulnerabilities. *Indian Economy* * Despite an uncertain global backdrop, the Indian economy remains a key driver of global growth, underpinned by sound macroeconomic fundamentals and prudent macroeconomic policies. *Domestic Financial System* * The domestic financial system is exhibiting 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. *Scheduled Commercial Banks (SCBs)* * The soundness and resilience of SCBs are bolstered by robust capital buffers, multi-decadal low non-performing loans ratio and strong earnings. * Stress tests affirm that most SCBs have adequate capital buffers relative to the regulatory minimum even under adverse stress scenarios, validating the resilience of mutual funds and clearing corporations. *Non-Banking Financial Companies (NBFCs) and Insurance Sector* * 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** **Scheduled Commercial Banks (SCBs)** *Impact* * SCBs must continue to maintain robust capital buffers and manage non-performing loans effectively to ensure resilience against adverse stress scenarios. *Action Required* * SCBs should review and refine stress testing methodologies and capital planning. **Non-Banking Financial Companies (NBFCs)** *Impact* * NBFCs need to sustain healthy capital buffers, earnings, and asset quality to remain resilient. *Action Required* * NBFCs should focus on maintaining asset quality and managing liquidity risks. **Insurance Sector** *Impact* * Insurance companies are required to ensure that their consolidated solvency ratio remains above the minimum threshold limit. *Action Required* * Insurance companies should continually monitor and manage their solvency positions. **Mutual Funds and Clearing Corporations** *Impact* * Mutual Funds and Clearing Corporations were validated for resilience under stress test. *Action Required* * No action required, continue to maintain existing procedures.

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