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 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 like soaring public debt and elevated asset valuations can amplify shocks. * **Indian Economy and Financial Stability:** * The Indian economy remains a key driver of global growth, underpinned by sound macroeconomic fundamentals and prudent macroeconomic policies. * The domestic financial system is exhibiting 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 corporate balance sheets also supports macroeconomic stability. * **Scheduled Commercial Banks (SCBs):** * The soundness and resilience of SCBs are bolstered by robust capital buffers, multi-decadal low non-performing loans ratio and strong earnings. * Macro stress tests show 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) & 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** * **Impact:** Subject to testing from economic and trade policy uncertainties. * **Action Required:** Monitor and adapt to evolving global economic conditions. **Stakeholder: Financial Markets** * **Impact:** Subject to volatility, particularly in core government bond markets. * **Action Required:** Manage risks associated with market volatility and geopolitical factors. **Stakeholder: Indian Economy** * **Impact:** Continuing growth underpinned by sound macroeconomic fundamentals. * **Action Required:** Maintain prudent macroeconomic policies to support growth. **Stakeholder: Domestic Financial System (Banks & Non-Banks)** * **Impact:** Exhibiting resilience with healthy balance sheets. * **Action Required:** Maintain healthy balance sheets. **Stakeholder: Scheduled Commercial Banks (SCBs)** * **Impact:** Soundness and resilience due to capital buffers and low non-performing loan ratios. * **Action Required:** Maintain adequate capital buffers. **Stakeholder: Non-Banking Financial Companies (NBFCs)** * **Impact:** Remains healthy with sizable capital buffers, robust earnings and improving asset quality. * **Action Required:** Maintain capital buffers, earnings and asset quality. **Stakeholder: Insurance Sector** * **Impact:** Consolidated solvency ratio remains above minimum threshold. * **Action Required:** Maintain solvency ratio.

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