Financial Stability Report (FSR)

In its Financial Stability Report (FSR) released on Monday, June 30, 2025, the Reserve Bank of India (RBI) highlighted potential risks to the Indian economy. The central bank indicated that rising public debt, elevated asset valuations, and ongoing geopolitical tensions could lead to fresh market shocks.

Banking Sector Strength and Market Volatility

Despite these concerns, the report noted the continued resilience of the Indian banking system:

• The gross non-performing assets (NPAs) of the banking system reached a multi-decadal low of 2.3% in March 2025. This is a notable improvement from 2.8% in March 2024 and 2.6% in September 2024 for all scheduled commercial banks.
• The RBI emphasized that the soundness and resilience of banks are supported by “robust capital buffers, multi-decadal low NPA ratio, and strong earnings.”
• However, the central bank also pointed to volatility in Indian financial markets, with a particular focus on government bond markets. This volatility is attributed to shifts in policy and the evolving geopolitical environment.

While the domestic financial system demonstrates robustness, the RBI maintains that the global financial environment remains uncertain.

About the Financial Stability Report (FSR)

• The RBI publishes its Financial Stability Report biannually (twice a year), typically in June and December.
• The FSR presents the assessment of the Sub-Committee of the Financial Stability and Development Council (FSDC) regarding the strength of India’s financial system and the risks to its stability.