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 assessment by the Sub-Committee of the Financial Stability and Development Council (FSDC) on the resilience of the Indian financial system and associated risks. **Key Points / Main Content** * **Global and Financial Market Conditions:** * 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 environments. Existing vulnerabilities, such as high public debt and elevated asset valuations, may amplify shocks. * **Indian Economy and Financial System:** * Despite a challenging global backdrop, the Indian economy remains a key driver of global growth, supported by sound fundamentals and prudent policies. * The domestic financial system exhibits resilience due to healthy balance sheets of banks and non-banks. Eased financial conditions are supported by accommodative monetary policy and low volatility, with corporate balance sheets contributing to overall stability. * **Scheduled Commercial Banks (SCBs):** * SCBs' soundness and resilience are strengthened by robust capital buffers, low non-performing loans ratio, and strong earnings. * Macro stress tests indicate that most SCBs maintain adequate capital buffers above regulatory minimums, even under adverse conditions. Resilience of mutual funds and clearing corporations is also validated by stress tests. * **Non-Bank Financials and Insurance:** * Non-banking financial companies (NBFCs) remain healthy with sizable capital buffers, robust earnings, and improved asset quality. * The consolidated solvency ratio of the insurance sector remains above the minimum threshold limit. **Impact Analysis** **Scheduled Commercial Banks (SCBs), Mutual Funds, Clearing Corporations and Non-Banking Financial Companies (NBFCs)** *Impact:* The SCBs, mutual funds, clearing corporations and NBFCs are assessed for capital adequacy and resilience under stress conditions. *Action Required:* Maintain adequate capital buffers and continue robust risk management practices. **Insurance Sector** *Impact:* The insurance sector is assessed for its solvency ratio. *Action Required:* Maintain the consolidated solvency ratio above the minimum threshold limit.

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