Despite global economic uncertainties, India remains a major engine of global growth, backed by strong fundamentals and prudent
policymaking, according to the June 2025 edition of the RBI’s Financial Stability Report (FSR).
What is the Financial Stability Report (FSR)?
The Financial Stability Report is a biannual publication by the Reserve Bank of India (RBI) that assesses:
- The health and resilience of India’s financial system
- Domestic and global risks
- The overall state of financial stability
Key Features of the FSR
- Frequency: Published twice a year (June & December)
- Coverage: Includes banks, NBFCs, cooperative banks, mutual funds, insurance, etc.
- Risk Analysis: Evaluates systemic risks and external vulnerabilities
- Stress Testing: Simulates adverse economic scenarios for banks and financial institutions
- Policy Insights: Offers guidance to regulators and the government
- Highlights of the June 2025 Financial Stability Report
🇮🇳 India as a Global Growth Driver
India continues to contribute significantly to global economic growth
Supported by strong domestic demand, macroeconomic stability, and policy prudence
- 📈 GDP Growth Outlook (FY2025–26)
- Projected Growth: 6.5%
- Growth is moderate, affected by:
- Global trade disruptions
- Geopolitical tensions
- Climate-related shocks
🌍 Risks to Growth
- External Spillovers: US tariffs, global trade fragmentation
- Climate Shocks: Weather events may disrupt agriculture and supply chains
- Geopolitical Volatility: Ongoing conflicts and policy unpredictability raise uncertainty
📊 Inflation Trends
- May 2025 CPI: 2.8% — lowest since Feb 2019
- Inflation well within RBI’s target band of 4% ± 2%
- RBI confident in durable price stability under the Flexible Inflation Targeting (FIT) framework
- Financial Sector Resilience
🏦 Banking Sector
Strong Capital Buffers and Low NPAs
Stress tests confirm that Scheduled Commercial Banks (SCBs) can withstand severe shocks
SCBs show:
- Robust earnings
- Multi-decade low NPAs
- Stable capital adequacy ratios
💼 NBFCs & Corporate Sector
NBFCs display:
- Improved asset quality
- Strong profitability
- Healthy capital buffers
- Corporate balance sheets support overall financial stability
🛡️ Other Financial Institutions
- Mutual Funds and Clearing Corporations: Resilient under stress
- Insurance Sector: Maintains solvency ratio well above regulatory thresholds
- Financial and Global Outlook
📉 Financial Conditions
- Remain accommodative, supported by:
- Low market volatility
- Supportive monetary policy
🌐 Global Financial Risks
April 2025 market turbulence exposed systemic vulnerabilities
Concerns include:
- High public debt
- Tech-driven disruptions
- Prolonged geopolitical conflicts
- Climate change impacts
🧠 Systemic Risk Perception
- May 2025 Systemic Risk Survey (SRS):
- All risk categories rated ‘medium’
- 92% of respondents expressed confidence in India’s financial system
Conclusion: Cautious Optimism with Vigilance
The Indian financial system remains resilient and continues to underpin global growth.
However, the RBI stresses the need for policy vigilance, agility, and preparedness amid a rapidly evolving global economic
environment.