RBI Flags Strong Resilience In Indian Financial System In June 2025 Stability Report

India’s financial system continues to exhibit robust health, underpinned by strong balance sheets across banks, non-bank financial companies (NBFCs), and insurers, according to the Reserve Bank of India’s June 2025 Financial Stability Report (FSR).

The report paints a reassuring picture of macroeconomic stability, even as the global financial environment remains volatile.

The central bank reported that Indian banks are well-capitalised, with robust earnings and historically low non-performing asset (NPA) ratios.

Most banks were found to maintain adequate capital buffers, even under adverse macroeconomic stress test scenarios.

Similarly, NBFCs have demonstrated resilience, supported by improving asset quality, strong profitability, and healthy capital positions.

“NBFCs remain healthy with sizeable capital buffers, robust earnings, and improving asset quality,” the report noted.

Insurance & market infrastructure stable

The insurance sector also remains strong, with the consolidated solvency ratio staying above regulatory thresholds.

This suggests that insurers are adequately prepared to absorb financial shocks.

Moreover, the RBI affirmed the resilience of mutual funds and clearing corporations, stating that macro stress tests validate their stability, alongside that of the banking sector.

Despite the domestic strength, the RBI cautioned that global economic volatility poses significant risks.

“Elevated economic and trade policy uncertainties are testing the resilience of the global economy and financial system,” the report warned.

Volatility in financial markets, largely driven by changing geopolitical dynamics and shifting policy landscapes, continues to challenge global forecasting and decision-making.

Governor Malhotra: Financial stability key to growth

In his foreword to the FSR, RBI Governor Sanjay Malhotra highlighted financial stability as a fundamental prerequisite for sustained economic growth.

“Like price stability, financial stability is a necessary condition for boosting growth, though not sufficient on its own,” he said.

Malhotra pointed to global structural shifts—such as technological disruption, climate change, and geopolitical tensions—as complicating factors in policymaking.

He stressed that regulators must remain agile, vigilant, and prudent in order to navigate the ongoing uncertainty.

The Governor also underscored the role of regulators in safeguarding the financial ecosystem while encouraging innovation.

“Financial sector regulators remain committed to protecting customers, promoting competition and fostering innovation, while ensuring safety and soundness,” he said.

Malhotra expressed confidence in India’s economic momentum, noting that the country is playing a key role in driving global growth.

He cited strong domestic fundamentals and sound macroeconomic policies as key drivers.

On inflation, the outlook remains favourable.

“There is greater confidence in the durable alignment of inflation with the Reserve Bank’s target,” Malhotra remarked.

He concluded that India’s financial system is growing increasingly resilient, supported by low NPAs, high capital adequacy, and robust profitability.

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