RBI releases the Financial Stability Report, June 2025

**Executive Summary** The Reserve Bank released the June 2025 issue of the Financial Stability Report (FSR). This 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. The report was released on June 30, 2025. **Key Points / Main Content** *Global and Financial System Resilience* * Elevated economic and trade policy uncertainties are testing the resilience of the global economy and the financial system. * Financial markets remain volatile, driven by shifting policy and geopolitical environment, with existing vulnerabilities potentially amplifying fresh shocks. *Indian Economy and Financial Stability* * The Indian economy remains a key driver of global growth, supported by sound macroeconomic fundamentals and policies, despite a challenging global backdrop. * The domestic financial system exhibits resilience due to healthy balance sheets of banks and non-banks, supported by accommodative monetary policy and low financial market volatility. *Banking and Financial Sector Performance* * Scheduled Commercial Banks (SCBs) show soundness and resilience, bolstered by robust capital buffers, low non-performing loans ratio, and strong earnings. * Macro stress tests confirm that most SCBs have adequate capital buffers even under adverse scenarios, validating 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** **Scheduled Commercial Banks (SCBs)** *Impact:* * The report confirms their soundness and resilience. * Stress tests provide insights into their capital adequacy under adverse scenarios. *Action Required:* * Maintain robust capital buffers. * Continue to improve asset quality. **Non-Banking Financial Companies (NBFCs)** *Impact:* * The report reflects their health. *Action Required:* * Continue to maintain sizable capital buffers. * Sustain robust earnings and improving asset quality. **Insurance Sector** *Impact:* * The report indicates the solvency ratio is above the minimum threshold. *Action Required:* * Ensure that the consolidated solvency ratio remains above the minimum threshold limit. **Mutual Funds and Clearing Corporations** *Impact:* * The report validates the resilience of mutual funds and clearing corporations under various stress scenarios. *Action Required:* * Continue to maintain resilience under adverse stress scenarios. **Policymakers (RBI, FSDC Sub-Committee)** *Impact:* * The FSR provides a comprehensive assessment of financial stability, informing policy decisions. *Action Required:* * Utilize the FSR findings to address vulnerabilities and ensure the stability of the Indian financial system.

Key Entities Referenced