RBI releases the Financial Stability Report, June 2025

**Executive Summary** The Reserve Bank released the June 2025 issue of the Financial Stability Report (FSR) on June 30, 2025. 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 associated risks. **Key Points / Main Content** *Global Economy and Financial System* * Elevated economic and trade policy uncertainties test the global economy and financial system's resilience. * Financial markets remain volatile due to shifting policy and geopolitical factors, with vulnerabilities such as high public debt and elevated asset valuations. *Indian Economy* * The Indian economy remains a key driver of global growth, underpinned by sound macroeconomic fundamentals and policies. * The domestic financial system is resilient, supported by healthy balance sheets of banks and non-banks, accommodative monetary policy, and low volatility in financial markets. *Banking Sector* * Scheduled commercial banks (SCBs) show soundness and resilience due to robust capital buffers, low non-performing loan ratios, and strong earnings. * Macro stress tests confirm that most SCBs have adequate capital buffers, even under adverse scenarios, also validating the resilience of mutual funds and clearing corporations. *Non-Banking and Insurance Sectors* * Non-banking financial companies (NBFCs) remain healthy with sizable capital buffers, robust earnings, and improving asset quality. * The insurance sector's consolidated solvency ratio remains above the minimum threshold limit. **Impact Analysis** **Banks and Financial Institutions** *Impact* * Financial institutions need to maintain robust capital buffers and manage asset quality to withstand global economic uncertainties and market volatility. *Action Required* * Stress test regularly to ensure maintenance of adequate capital buffers relative to the regulatory minimum. **Non-Banking Financial Companies (NBFCs)** *Impact* * NBFCs need to sustain healthy capital buffers and asset quality to ensure continued stability. *Action Required* * Continue to maintain sizable capital buffers, improve earnings, and manage asset quality effectively. **Insurance Sector** *Impact* * Insurance companies must ensure that the consolidated solvency ratio remains above the minimum threshold limit to maintain stability. *Action Required* * Monitor and maintain solvency ratios to meet regulatory requirements. **Mutual Funds and Clearing Corporations** *Impact* * Mutual Funds and Clearing Corporations validated as resilient. *Action Required* * Continue to adhere to best practices to maintain stability under pressure.

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