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. This 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 the risks to financial stability. The report highlights key factors influencing the global and domestic financial landscape. **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, particularly core government bond markets, driven by policy shifts and geopolitical factors. * Existing vulnerabilities, such as rising public debt and high asset valuations, could amplify shocks. *Indian Economy* * The Indian economy remains a key driver of global growth despite challenging global conditions. * This is supported by sound macroeconomic fundamentals and prudent macroeconomic policies. *Domestic Financial System* * The domestic financial system demonstrates resilience due to healthy balance sheets of banks and non-banks. * Financial conditions have eased, supported by accommodative monetary policy and low volatility in financial markets. * Strong corporate balance sheets contribute to overall macroeconomic stability. *Scheduled Commercial Banks (SCBs)* * SCBs are sound and resilient, supported by strong capital buffers, low non-performing loan ratios, and strong earnings. * Macro stress tests confirm that most SCBs have adequate capital buffers relative to the regulatory minimum, even under adverse scenarios. * 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: Global Economy and Financial System** * **Impact:** The elevated economic and trade policy uncertainties will test resilience. The global economy needs to adapt to volatility and potential shocks. * **Action Required:** Monitor global economic conditions and implement policies to mitigate risks. **Stakeholder: Indian Economy** * **Impact:** The Indian economy is poised for growth, but needs to maintain sound macroeconomic policies. * **Action Required:** Maintain prudent macroeconomic policies and strengthen economic fundamentals. **Stakeholder: Domestic Financial Institutions (Banks, NBFCs, Insurance)** * **Impact:** Need to maintain healthy balance sheets and capital buffers. * **Action Required:** Maintain capital buffers, manage asset quality, and adhere to regulatory requirements.

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