Financial Stability Report 2025

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.

Financial Stability and Development Council (FSDC)

Establishment: Formed in 2010 as a non-statutory apex body by the Government of India.
Chairperson: The Union Finance Minister
Members:
- Heads of key financial regulators: RBI, SEBI, IRDAI, PFRDA, and FMC (now merged with SEBI)
- Finance Secretary and other senior officials
- Expanded in 2018 to include additional members for broader coordination
Key Functions:
- Promote and maintain financial stability
- Encourage development of the financial sector
- Facilitate inter-regulatory coordination
- Address issues related to financial literacy, financial inclusion, and macroprudential supervision

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.

As part of the FSR, the RBI also conducts a Systemic Risk Survey (SRS), which gathers views from experts and market participants on five key risk categories: Global Risks, Financial Risks, Macroeconomic Risks, Institutional Risks, General Risk.

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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