Mumbai, 30 June 2025
— Despite facing a turbulent global economic landscape, India remains a key engine of global growth, supported by solid macroeconomic fundamentals and prudent policy decisions, the Reserve Bank of India (RBI) stated in its June 2025 Financial Stability Report (FSR).
The report noted that global financial markets are grappling with heightened volatility, policy shifts, and geopolitical tensions. Rising public debt, inflated asset prices, and elevated uncertainty in trade and economic policies pose significant risks to global financial stability.
However, India’s domestic financial system continues to show resilience, underpinned by strong balance sheets in both banking and non-banking sectors. “Scheduled Commercial Banks (SCBs) are backed by robust capital buffers, record-low non-performing asset (NPA) levels, and healthy earnings,” the RBI highlighted.
Macro stress tests conducted by the central bank confirm that most SCBs would remain adequately capitalized even under severe stress scenarios. Similar resilience is observed among mutual funds, clearing corporations, and NBFCs, which have shown improvements in asset quality and profitability.
The insurance sector also remains stable, with its consolidated solvency ratio well above the regulatory threshold, adding to the robustness of India’s financial architecture.
While the domestic outlook is broadly positive, external spillovers and climate-related risks could still impact growth. That said, the inflation outlook remains benign, with greater confidence in achieving the RBI’s target range, said Governor Sanjay Malhotra.
Malhotra emphasized that financial regulators remain focused on balancing efficiency, innovation, and stability, while ensuring strong consumer protection and competitive markets.
“Financial stability—like price stability—is necessary, though not sufficient, to unlock India’s full growth potential. A well-functioning financial system must foster macroeconomic stability and deliver services efficiently,” he added.
