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 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 have the potential to amplify fresh shocks. *Indian Economy and Financial System* * Despite an uncertain and challenging global economic backdrop, the Indian economy remains a key driver of global growth. * The Indian economy is 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 the corporate balance sheets also lends support to overall macroeconomic stability. *Scheduled Commercial Banks (SCBs)* * The soundness and resilience of scheduled commercial banks (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-Bank Financials and Insurance* * 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** **Scheduled Commercial Banks (SCBs)** *Impact* SCBs are found to have adequate capital buffers relative to regulatory minimums, even under adverse stress. *Action Required* None explicitly stated, but SCBs should maintain capital buffers and robust earnings. **Non-banking financial companies (NBFCs)** *Impact* NBFCs are healthy with sizeable capital buffers, robust earnings and improving asset quality. *Action Required* None explicitly stated, but NBFCs should continue to maintain healthy balance sheets. **Insurance Sector** *Impact* The consolidated solvency ratio of the insurance sector remains above the minimum threshold limit. *Action Required* None explicitly stated, but insurance sector should continue to maintain solvency. **Mutual Funds and Clearing Corporations** *Impact* Stress tests validate the resilience of mutual funds and clearing corporations. *Action Required* None explicitly stated, but Mutual Funds and Clearing Corporations should continue to maintain resilience.

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