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 report reflects the 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. **Key Points / Main Content** *Global and Financial Stability* * Elevated economic and trade policy uncertainties are testing the resilience of the global economy and the financial system. * Financial markets remain volatile due to shifting policy and geopolitical environments. Soaring public debt and elevated asset valuations could amplify fresh shocks. *Indian Economy* * Despite global challenges, the Indian economy remains a key driver of global growth due to sound macroeconomic fundamentals and prudent policies. * The domestic financial system exhibits resilience, supported by healthy balance sheets of banks and non-banks, accommodative monetary policy, and low financial market volatility. Strong corporate balance sheets support macroeconomic stability. *Scheduled Commercial Banks (SCBs)* * SCBs are sound and resilient, bolstered by robust capital buffers, low non-performing loans ratio, and strong earnings. * Macro stress tests confirm that most SCBs have adequate capital buffers relative to the regulatory minimum under adverse scenarios. Stress tests also validate the resilience of mutual funds and clearing corporations. *Other Financial Institutions* * 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** **RBI** *Impact* The RBI is responsible for releasing the Financial Stability Report, assessing the resilience of the Indian financial system and risks to financial stability. *Action Required* The RBI should continue to monitor financial markets for vulnerabilities and maintain policy to support economic growth and financial stability. **Financial Institutions (Banks, NBFCs, Insurance Companies)** *Impact* Must maintain healthy balance sheets, adequate capital buffers, and manage risks effectively. *Action Required* Financial institutions need to implement stress testing and maintain strong risk management practices to maintain resilience.

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