RBI releases the Financial Stability Report, June 2025

**Executive Summary** The Reserve Bank of India released the June 2025 Financial Stability Report (FSR) on June 30, 2025. The FSR reflects the 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 Markets* * 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 global backdrop, the Indian economy remains a key driver of global growth, underpinned by sound macroeconomic fundamentals and prudent macroeconomic policies. * The domestic financial system exhibits 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 scheduled commercial banks (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. *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 also remains above the minimum threshold limit. **Impact Analysis** **Banks and Non-Banking Financial Institutions** *Impact* * Need to maintain healthy balance sheets and robust capital buffers to ensure resilience. * SCBs are validated on their resilience based on the adequacy of capital buffers relative to regulatory requirements *Action Required* * Continue to monitor and manage vulnerabilities such as soaring public debt levels and elevated asset valuations. * Maintain sound macroeconomic fundamentals and prudent macroeconomic policies. **Mutual Funds and Clearing Corporations** *Impact* * Resilience validated through stress tests. *Action Required* * Continue to maintain sufficient resources and mechanisms to withstand adverse market conditions. **Insurance Sector** *Impact* * Need to maintain consolidated solvency ratio above the minimum threshold limit. *Action Required* * Continued focus on earnings and asset quality to maintain solvency.

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