Financial Stability Report (FSR)

The FSR is published twice yearly (June and December) by the RBI, incorporating inputs from all financial sector regulators.

• It provides a collective assessment by the Financial Stability and Development Council (FSDC) Sub-Committee on risks to India’s financial system stability.

Key Highlights of June 2025 FSR:

• India’s Economy:
  Continues to be a key driver of global growth, backed by sound macroeconomic fundamentals and prudent policies.

  Risks and Headwinds:
  Geopolitical tensions, trade disruptions, and weather-related uncertainties pose downside risks.

  Non-Performing Assets (NPA):

  • Gross NPA (GNPA) at 2.3% as of March 2025 (multi-decadal low).

  • Expected to rise slightly to 2.5% in baseline scenario.

  • For 46 major banks (holding 98% of SCBs’ assets), GNPA may increase to 2.6% by March 2027.

  Capital Adequacy:

  • Banks maintain capital well above regulatory minimums.

  • Even under severe stress tests, capital ratios stay comfortably above required levels, signaling strong shock absorption capacity.

  Inflation and Domestic Demand:

  • Growth is primarily domestic demand-driven.

  • Food inflation outlook is positive with softening prices and record crop production.

  Financial System Health:

  • Stable banking and non-banking financial institutions (NBFCs) with healthy balance sheets.

  • NBFCs report robust earnings, good capital buffers, and improving asset quality.

Financial Stability and Development Council (FSDC)

• Established: 2010 (non-statutory apex body by the Government of India)

  Chairperson: Union Finance Minister

  Members: Heads of RBI, SEBI, IRDAI, PFRDA, FMC (now merged with SEBI), Finance Secretary, other senior officials

  Expanded: 2018, for broader regulatory coordination

Functions:

• To Promote and maintain financial stability

  To Encourage the financial sector development

  To Facilitate the inter-regulatory coordination

  To Address financial literacy, inclusion, and macroprudential supervision

Systemic Risk Survey (SRS)

Conducted to gauge expert and market participant views on five risk categories: Global, Financial, Macroeconomic, Institutional, and General Risks.

All categories rated as ‘medium risk’.

92% of respondents expressed high or unchanged confidence in the domestic financial system.

Major short-term threats: geopolitical tensions, capital outflows, global trade slowdowns.

Persistent concerns: rising global public debt amid heightened uncertainty.

Conclusion

India’s economy and financial system show strong resilience and growth potential. Economy Continued vigilance and regulatory coordination through the FSDC help maintain stability amid external risks and Overall confidence remains robust, supporting a positive outlook for India’s financial sector.