India's financial system in strong position to withstand global shocks: RBI

India's financial system possesses considerable resilience and adequate capitalization to navigate ongoing global uncertainties, the Reserve Bank of India (RBI) stated in its Financial Stability Report for June 2026. The report, reflecting the assessment of the Financial Stability and Development Council's Sub-Committee, indicates that markets have largely absorbed recent shocks, though significant risks remain.

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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 RBI observed that while the global financial system has shown notable resilience, "global financial stability risks remain elevated." Potential threats include persistent supply chain uncertainties that could tighten financial conditions and fuel inflation, alongside vulnerabilities stemming from high public debt, bond market fragilities, stretched asset valuations, and leveraged non-banking financial institutions (NBFIs).

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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.

In contrast, India's macroeconomic fundamentals provide a stronger position compared to many of its peers, enhancing its resilience to external shocks. The RBI highlighted that the balance of risks has become more favorable due to interim peace agreements and recent policy measures supporting capital inflows. The domestic financial system continues to demonstrate strength across all sectors, supported by robust bank and non-bank balance sheets.

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Nevertheless, global financial stability risks remain elevated.

Scheduled commercial banks are reported to be safe and sound, bolstered by strong capital and liquidity buffers, improved asset quality, and stable profitability. Macro stress tests suggest the banking system is well-prepared to handle adverse scenarios, with aggregate capital ratios projected to stay comfortably above regulatory thresholds. Similarly, non-banking financial companies (NBFCs) are financially sound, characterized by strong capitalization, healthy profitability, and improving asset quality. The insurance sector also maintains stability, with life insurers' solvency ratios remaining above the minimum threshold.

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Domestic financial system remains resilient underpinned by strong bank and non-bank balance sheets.