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 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 risks to financial stability. **Key Points / Main Content** *Global Economy and Financial System:* * 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 environments. * Existing vulnerabilities, such as soaring public debt levels and elevated asset valuations, have the potential to amplify fresh shocks. *Indian Economy:* * The Indian economy remains a key driver of global growth, underpinned by sound macroeconomic fundamentals and prudent macroeconomic policies, despite a challenging global backdrop. * 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. * The strength of the corporate balance sheets also lends support to 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 also remains above the minimum threshold limit. **Impact Analysis** **RBI** *Impact:* * Responsible for releasing the report and overseeing financial stability. *Action Required:* * Continue monitoring and maintaining financial stability through appropriate policies. **Banks and Financial Institutions (SCBs & NBFCs)** *Impact:* * Their performance is evaluated and reported on in the FSR. *Action Required:* * Maintain healthy balance sheets, capital buffers, and asset quality. **Insurance Sector** *Impact:* * Their solvency ratio is assessed. *Action Required:* * Maintain solvency ratio above the minimum threshold limit. **Financial Stability and Development Council (FSDC)** *Impact:* * Their collective assessment is reflected in the FSR. *Action Required:* * Collaborate and provide input to maintain financial stability.

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