India's financial system resilient despite global risks: RBI FSR

India's financial system is resilient and well-capitalised despite global uncertainties, says the RBI's Financial Stability Report. It highlights strong banks and NBFCs, and stress tests show they can absorb shocks, placing India in a strong position.

India's financial system remains resilient and well-capitalised despite persistent global uncertainties, the Reserve Bank of India said in the June 2026 edition of its Financial Stability Report.

Global Financial System's Resilience and Risks

The FSR reflects the collective assessment of the Sub-Committee of the Financial Stability and Development Council on risks to financial stability. The RBI said global markets have largely absorbed recent shocks. "Despite repeated shocks, the global financial system has thus far demonstrated notable resilience, with markets remaining orderly after an initial bout of volatility following the outbreak of the West Asia conflict," the report said.

But the central bank warned that risks have not eased. "Nevertheless, global financial stability risks remain elevated," the RBI said. It noted that persistent supply chain uncertainties could tighten financial conditions and revive inflation, while elevated public debt, bond market fragilities, stretched asset valuations, and leveraged NBFIs remain key vulnerabilities.

India's Strong Position Amid External Shocks

India's position is comparatively stronger. "India's sound macroeconomic fundamentals place it in a stronger position than many of its peers and provide greater resilience to external shocks than in past crisis episodes," the FSR said.

The RBI added that the balance of risks has turned favourable due to the interim peace deal and recent policy steps to support capital inflows.

Domestic Financial System Shows Strength

The domestic financial system continues to show strength across sectors. "Domestic financial system remains resilient underpinned by strong bank and non-bank balance sheets," the report said.

Banking Sector Remains Sound

Scheduled commercial banks remain safe and sound, backed by strong capital and liquidity buffers, better asset quality, and stable profits.

Stress tests indicate banks are prepared for adverse scenarios. "Macro stress test results indicate that the banking system remains well-positioned to absorb potential shocks, with aggregate capital ratios projected to remain comfortably above regulatory thresholds even under hypothetical adverse scenarios," according to the RBI.

NBFC and Insurance Sector Stability

Non-banks are also on solid ground. "Non-banking financial companies (NBFCs) remain financially sound, supported by strong capitalisation, healthy profitability, and improving asset quality," the report said.

The insurance sector continues to maintain stability. "The insurance sector continues to display balance sheet resilience with the solvency ratio of life insurers remaining above the minimum threshold," it added.

Strong capital buffers, improving asset quality and coordinated policy support are helping India's financial system navigate global headwinds. (ANI)

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