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 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 Economy and Financial System* * 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* * Despite an uncertain and challenging global economic backdrop, the Indian economy remains a key driver of global growth. * Growth is underpinned by sound macroeconomic fundamentals and prudent macroeconomic policies. *Domestic Financial System* * 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 the corporate balance sheets also lends support to overall 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 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-Banking Financial Companies (NBFCs) and Insurance Sector* * 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** **Banks (Scheduled Commercial Banks - SCBs)** * **Impact:** SCBs are shown to be resilient with robust capital buffers. They need to maintain this stability under adverse stress scenarios. * **Action Required:** SCBs must continue to maintain adequate capital buffers and manage non-performing loans effectively to ensure resilience. **Non-Banking Financial Companies (NBFCs)** * **Impact:** NBFCs are shown to be healthy with sizable capital buffers and good asset quality, but should remain vigilant. * **Action Required:** NBFCs should maintain sizable capital buffers, robust earnings and improve asset quality. **Insurance Sector** * **Impact:** The insurance sector has adequate solvency, but should remain vigilant. * **Action Required:** Ensure the solvency ratio remains above the minimum threshold limit. **Mutual Funds and Clearing Corporations** * **Impact:** The resilience of mutual funds and clearing corporations has been validated under stress tests. * **Action Required:** Maintain resilience and prepare for potential adverse stress scenarios.

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