Despite global economic uncertainty, the Indian economy continues to drive global growth, backed by strong macroeconomic fundamentals and prudent policies, the Reserve Bank of India (RBI) said on Monday.
In its June 2025 Financial Stability Report (FSR), the RBI noted that rising global economic and trade policy uncertainties are testing the resilience of the world economy and financial systems.
“Financial markets remain volatile, especially core government bond markets, driven by changing policies and geopolitical factors,” the report said. It added that existing risks like soaring public debt and high asset valuations could worsen new shocks.
However, India’s domestic financial system shows resilience, thanks to the healthy balance sheets of banks and non-banking institutions, the Central Bank stated.
Financial conditions have improved, supported by accommodative monetary policy and low volatility. Robust corporate balance sheets also contribute to macroeconomic stability.
The RBI said scheduled commercial banks (SCBs) remain sound and resilient, backed by strong capital buffers, low levels of non-performing loans, and healthy earnings.
Stress tests show that most SCBs have enough capital even under adverse scenarios. The report also confirmed that mutual funds and clearing corporations demonstrated resilience under stress tests.
Non-banking financial companies (NBFCs) continue to perform well, with large capital buffers, rising earnings, and better asset quality. The solvency ratio in the insurance sector remains above the minimum threshold.
Growth momentum and inflation outlook remain stable
India’s growth momentum is supported by strong domestic drivers, stable policies, and firm macro fundamentals. Despite this, the RBI warned that external spillovers and weather-related risks could challenge growth.
“The inflation outlook is benign, and there is stronger confidence in keeping inflation aligned with the RBI’s target,” said RBI Governor Sanjay Malhotra.
He further added that financial regulators are committed to protecting customers, ensuring fair competition, and promoting innovation. They aim to balance growth, efficiency, safety, and soundness in the financial system.
“Financial stability, like price stability, is necessary, though not enough, to unlock India’s full growth potential,” Malhotra said. “As guardians of financial stability, we must build a financial system that supports macroeconomic stability and delivers services efficiently.”
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