RBI releases the Financial Stability Report, June 2025

**Executive Summary** The Reserve Bank of India (RBI) released the June 2025 Financial Stability Report (FSR), reflecting the Sub-Committee of the Financial Stability and Development Council (FSDC)'s assessment of the Indian financial system's resilience and associated risks. The report highlights both global economic challenges and the relative stability of the Indian financial system. The release date of the press release is June 30, 2025. **Key Points / Main Content** *Global Economic and Financial Landscape:* * Elevated economic and trade policy uncertainties challenge the global economy and the financial system. * Financial markets are volatile, especially core government bond markets, due to shifting policies and geopolitical factors. Existing vulnerabilities such as high public debt and elevated asset valuations could amplify shocks. *Indian Economic and Financial System:* * The Indian economy remains a key driver of global growth, supported by strong fundamentals and prudent policies, despite global challenges. * The domestic financial system shows resilience, bolstered by healthy balance sheets of banks and non-banks. Eased financial conditions are supported by accommodative monetary policy and low market volatility. Corporate balance sheet strength supports macroeconomic stability. *Scheduled Commercial Banks (SCBs):* * SCBs are sound and resilient, supported by strong capital buffers, multi-decadal low non-performing loan ratios, and strong earnings. * Macro stress tests indicate that most SCBs have adequate capital buffers above the regulatory minimum under adverse conditions. Stress tests also validate the resilience of mutual funds and clearing corporations. *Non-Banking Financial Companies (NBFCs) and Insurance Sector:* * 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** **Stakeholder: Scheduled Commercial Banks (SCBs)** * **Impact:** SCBs should note the affirmation of their resilience and capital adequacy in adverse scenarios. * **Action Required:** Maintain strong capital buffers and manage risks effectively to sustain resilience. **Stakeholder: Non-Banking Financial Companies (NBFCs)** * **Impact:** NBFCs should acknowledge their healthy financial state. * **Action Required:** Continue to focus on maintaining sizable capital buffers, improving asset quality, and ensuring robust earnings. **Stakeholder: Insurance Sector** * **Impact:** The insurance sector needs to note the confirmation of its solvency ratio exceeding the minimum threshold. * **Action Required:** Maintain solvency and prudently manage risks to ensure continued compliance with regulatory requirements. **Stakeholder: Mutual Funds and Clearing Corporations** * **Impact:** Mutual Funds and Clearing Corporations can note the validation of their resilience. * **Action Required:** Continue to ensure resilience under stress conditions.

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