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 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 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, 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:** * Despite global challenges, 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 due to healthy balance sheets of banks and non-banks. * **Banking and Financial Institutions:** * Scheduled commercial banks (SCBs) are sound and resilient, bolstered by robust capital buffers, multi-decadal low non-performing loans ratio and strong earnings. * Macro stress tests indicate 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) 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:** The report affirms their soundness and resilience. * **Action Required:** Maintain robust capital buffers, low non-performing loans ratio, and strong earnings. **Stakeholder: Non-Banking Financial Companies (NBFCs)** * **Impact:** The report highlights their healthy state. * **Action Required:** Maintain sizable capital buffers, robust earnings, and improving asset quality. **Stakeholder: Insurance Sector** * **Impact:** The report confirms the solvency ratio is above the minimum threshold. * **Action Required:** Maintain the consolidated solvency ratio above the minimum threshold limit. **Stakeholder: Mutual Funds and Clearing Corporations** * **Impact:** The report validates their resilience under stress. * **Action Required:** Ensure continued resilience in adverse stress scenarios.

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