India’s banking system remains resilient, with scheduled commercial banks (SCBs) supported by strong capital and liquidity buffers, improving asset quality and stable profitability, the Reserve Bank of India (RBI) said in its June 2026 Financial Stability Report (FSR).
The central bank said the consolidated balance sheet of SCBs continued to strengthen during FY2025-26, with healthy capital ratios, comfortable liquidity buffers and improving credit quality, positioning the sector to withstand potential economic shocks.
Banks remain well-capitalised
According to the report, macro stress tests indicate that the Indian banking system remains well-positioned to absorb adverse scenarios, with aggregate capital ratios projected to stay comfortably above the prescribed regulatory minimum even under hypothetical stress conditions.
The RBI noted that both credit and deposit growth gathered pace during the second half of FY2025-26, while net interest margins (NIMs) remained broadly stable over the financial year.
Although growth in earnings before provisions and tax (EBPT) moderated due to slower growth in other operating income, banks continued to maintain healthy profitability.
NBFCs and insurers also remain financially sound
The RBI said India’s non-banking financial companies (NBFCs) continue to remain financially strong, supported by robust capitalisation, healthy profitability and improving asset quality.
The insurance sector also maintained balance sheet resilience, with the solvency ratio of life insurers remaining above the regulatory minimum threshold.
India’s macro fundamentals provide resilience
The central bank said India’s strong macroeconomic fundamentals place the country in a better position than many of its global peers to withstand external shocks.
According to the report, the balance of risks has turned more favourable following the interim peace agreement in West Asia and recent policy measures introduced by the Government and the RBI to strengthen capital inflows.
Global risks remain elevated
Despite repeated geopolitical and economic shocks, the global financial system has demonstrated resilience, with financial markets remaining largely orderly following an initial bout of volatility after the outbreak of the West Asia conflict, the RBI said.
However, it cautioned that global financial stability risks remain elevated amid persistent supply chain uncertainties that could tighten financial conditions and rekindle inflationary pressures.
The report also highlighted elevated public debt levels, vulnerabilities in bond markets, stretched asset valuations and leverage among non-bank financial institutions as key risks that could amplify future shocks.