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RBI report highlights domestic resilience amid global flux, warns of volatile marketsRBI’s bi-annual Financial Stability Report cautioned about the volatility of financial markets, especially core government bond markets, driven by shifting policy and geopolitical environment. Alongside, existing vulnerabilities such as soaring public debt levels and elevated asset valuations have the potential to amplify shocks, it added.By Ritu Singh    | Vipal Durge  June 30, 2025, 7:40:29 PM IST (Updated)2 Min ReadThe Reserve Bank of India (RBI) on Monday, June 30, highlighted the resilience of the domestic financial system supported by healthy balance sheets of banks and companies. However, the central bank cautioned that heightened economic and trade policy uncertainties are testing that resilience.

The soundness of scheduled commercial banks (SCBs) was bolstered by robust capital buffers, multi-decadal low non-performing loans ratio and strong earnings, according to RBI’s bi-annual Financial Stability Report.

US tariffs have set a new paradigm in trade and economic policy, RBI Governor Sanjay Malhotra said, adding that geopolitical risks remain elevated and the near-term global financial stability risks have increased. However, the Indian economy remains a key driver of global growth, buoyed by strong domestic growth drivers and macroeconomic fundamentals, he added.

External spill-overs and weather events pose risks to growth, he noted.

Stress tests

Results of macro stress tests affirmed that most SCBs have adequate capital buffers relative to the regulatory minimum even under adverse stress scenarios. Stress tests also validated the resilience of mutual funds and clearing corporations.

The gross non-performing assets (NPA) ratio of 46 banks may rise marginally to 2.5% by March 2027 from 2.3% in March 2025. The capital ratio of the select 46 banks may rise to 15.2% by March 2027 from 14.6% in March 2025, according to the update.

Further, the non-banking financial companies (NBFCs) remain healthy with sizeable capital buffers, robust earnings, and improving asset quality, the report said, adding that the insurance sector too is robust, with the consolidated solvency ratio above the minimum threshold limit.

On the flip side, the central bank cautioned about the volatility of financial markets, especially core government bond markets, driven by shifting policies and geopolitical uncertainty. Alongside, existing vulnerabilities such as soaring public debt levels and elevated asset valuations have the potential to amplify fresh shocks.

Also read: RBI warns of risks in retail lending and rising write-offs

Growth prospects

Stating that India inflation outlook is benign, Malhotra expressed confidence that it will align with the 4% target. The resilience of India’s financial system is improving on account of capital buffers, low NPAs, high profitability, healthy balance sheets of companies and, banks, he added.

Moreover, the financial regulators are committed to protecting customers and promoting competition in the market, that will provide the stability needed to boost potential growth, Malhotra said.

Continue Reading(Edited by : Shoma Bhattacharjee)First Published: Jun 30, 2025 7:30 PM ISTCheck out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!TagsIndian banksRBI financial stability report