The Reserve Bank of India (RBI), in its Financial Stability Report (FSR), July 2025, highlights that India continues to be a major global growth driver, despite global economic uncertainties and geopolitical tensions.

Financial Stability Report (FSR)

• The Financial Stability Report is published twice a year (in June and December) by the Reserve Bank of India (RBI), with inputs from all financial sector regulators.
• It reflects the collective assessment of the FSDC Sub-Committee on both current and emerging risks to the stability of India’s financial system.

Key Highlights of the Report

• Macroeconomic Strength:
  • India remains a key global growth driver, with GDP growth projected at 6.5% for FY2026.
  • India’s growth is supported by strong domestic fundamentals and prudent macroeconomic policies.
  • Despite external spillovers and climate-related risks, the inflation outlook remains stable and aligned with RBI’s targets.
    • CPI fell to 2.8% in May 2025, the lowest since February 2019, down from 3.2% in April.
• Financial System:
  • Banking and non-banking sectors have strong capital buffers, low non-performing asset (NPA) ratios, and healthy profitability.
  • Corporate balance sheets are sound, contributing to broader macroeconomic stability.
• Stress Test Results:
  • Macro stress tests show that Scheduled Commercial Banks (SCBs) remain well-capitalized, even under adverse shock scenarios.
  • NBFCs continue to show strength with sizable capital buffers, improving asset quality, and solid earnings.
  • Mutual funds, clearing corporations, and the insurance sector also demonstrate resilience, with solvency ratios above regulatory thresholds.

Systemic Risk Survey (SRS)

• Risk Perception: All major risk categories are assessed as ‘medium risk’.
  • 92% of respondents expressed high or unchanged confidence in the domestic financial system.
• Identified Risks: Geopolitical tensions, capital outflows, and global trade slowdowns seen as major short-term threats.
  • Rising global public debt flagged as a persistent concern, particularly amid heightened global uncertainty.

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