RBI releases the Financial Stability Report, June 2025

**Executive Summary** The Reserve Bank of India (RBI) released the June 2025 issue of the 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 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, especially core government bond markets, driven by shifting policy and geopolitical environment. Existing vulnerabilities such as soaring public debt levels and elevated asset valuations could amplify fresh shocks. * **Indian Economy and Financial System:** * 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 supports overall macroeconomic stability. * **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. * Macro stress tests 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) and Insurance Sector:** * 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 SCBs' current soundness and resilience is affirmed, due to robust capital buffers and low non-performing loan ratios. Stress tests confirm the adequacy of these buffers even under adverse scenarios. * **Action Required:** Maintain robust capital buffers and continue prudent risk management practices. **Non-Banking Financial Companies (NBFCs)** * **Impact:** NBFCs maintain a healthy financial position with adequate capital buffers. * **Action Required:** Maintain sizable capital buffers and robust earnings. **Insurance Sector** * **Impact:** The insurance sector remains stable with a consolidated solvency ratio above the minimum threshold. * **Action Required:** Maintain solvency ratio above minimum threshold limit. **Mutual Funds and Clearing Corporations** * **Impact:** The resilience of mutual funds and clearing corporations has been validated in stress tests. * **Action Required:** Continue prudent risk management practices.

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