The Reserve Bank of India (RBI) has cautioned that economic uncertainties, such as geopolitical tensions, trade tensions, and rising debt levels worldwide, remain a threat to financial stability. According to the Financial Stability Report published by the central bank on June 30, 2025, core government bond markets are volatile as policy directions and geopolitical dynamics change.
The report noted that soaring public debt and high asset valuations could intensify any fresh shocks to the Indian economy. According to official Union Budget estimates, India’s public debt is projected to rise to ₹196.78 lakh crore by the end of the 2025–26 fiscal year, an increase from ₹181.74 lakh crore at the close of 2024–25. The RBI cautioned that such macroeconomic pressures, combined with international spillovers, may influence the country’s financial outlook in the near term.
Various domestic financial institutions in India are stable, notwithstanding the global headwinds. According to the RBI, both banks and non-banking financial companies (NBFCs) maintained a healthy balance sheet. Scheduled commercial banks (SCBs) are robust in capital buffers, with a currently minimal non-performing asset (NPA) ratio, and their profits are also high. The results of stress tests showed that SCBs' capital levels would be maintained above regulatory minimums even under adverse scenarios.
Capital strength has also been boosted in urban cooperative banks (UCBs). Meanwhile, NBFCs and insurance companies (life and non-life) are continuing to comply with solvency regulations. The report claimed that mutual funds and clearing corporations were resilient to stress tests. Stable corporate balance sheets and easy monetary policy have also favored other indicators, such as financial conditions.
The central bank emphasized that the Indian economy remains a key driver of global growth. Strong macroeconomic fundamentals and prudent fiscal policies continue to support expansion. Even amid an uncertain global backdrop, India’s economic growth trajectory remains intact.
The RBI's survey of systemic risk in May 2025 revealed that almost 92% of participants had confidence in India's financial system. However, approximately two-thirds of respondents reported that worldwide financial circumstances were deteriorating. The RBI acknowledged that risks from global spillovers and further geopolitical escalation remain a concern.
According to the report, although the financial system and Indian economy are adequately poised to absorb shocks that arise in the wake of tariffs, regulatory policies will remain critical to strengthen long-term resilience. Such initiatives include reforms aimed at digital lending oversight, improved liquidity buffers, retail investor protection, and prevention of financial and cyber fraud.