Reserve Bank of India said that the Indian economy and the financial system have demonstrated remarkable resilience despite facing external shocks of significant magnitude. In his foreword to the RBI’s Financial Stability Report, RBI Governor Sanjay Malhotra said strong growth, low inflation, healthy balance sheets of financial and non-financial firms, and ample buffers have helped preserve macro-financial stability.

The Financial Stability report stated that India’s sound macroeconomic fundamentals place it in a stronger position than many of its peers and provide greater resilience to external shocks. The report highlighted that the domestic financial system remains resilient, underpinned by strong bank and non-bank balance sheets. Scheduled Commercial Banks (SCBs) remain safe and sound, supported by strong capital and liquidity buffers, continued improvement in asset quality, and stable profitability. The report pointed out that elevated public debt, bond market fragilities, stretched asset valuations remain key vulnerabilities that could amplify future shocks.