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 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 financial system. * Financial markets remain volatile, especially core government bond markets, driven by shifting policy and geopolitical environments. * Existing vulnerabilities such as soaring public debt levels and elevated asset valuations have the potential to amplify fresh shocks. *Indian Economy:* * Despite a challenging global economic backdrop, the Indian economy remains a key driver of global growth. *Domestic Financial System:* * The domestic financial system exhibits resilience fortified by healthy balance sheets of banks and non-banks. *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 under adverse stress 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** **RBI** *Impact* Needs to stay vigilant and implement policies to address the risks identified in the FSR to maintain financial stability. *Action Required* Monitor the financial system and respond to the vulnerabilities. **Banks (SCBs & NBFCs)** *Impact* Need to maintain and strengthen their capital buffers and asset quality to withstand potential shocks. *Action Required* Conduct stress tests, maintain adequate capital, and manage risk appropriately. **Financial Institutions (Mutual Funds and Clearing Corporations)** *Impact* Need to maintain the resilience of mutual funds and clearing corporations. *Action Required* Manage financial reserves and make appropriate business decisions. **Insurance Sector** *Impact* Maintain the consolidated solvency ratio above the minimum threshold limit. *Action Required* Monitor financial performance and ensure compliance. **Investors** *Impact* Better understand the current state and potential future performance of the Indian financial market. *Action Required* Stay informed and make sound investment decisions. **General Public** *Impact* Reassured that the Indian financial system is robust, underpinned by a healthy economy. *Action Required* None.

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