The Indian economy continues to grow at a healthy pace, remaining a key driver of global growth due to sound macroeconomic fundamentals and prudent policies, according to the Reserve Bank of India’s latest Financial Stability Report (FSR) released on Monday.In its half-yearly assessment of the financial system, the RBI said, “Despite an uncertain and challenging global economic backdrop, the Indian economy remains a key driver of global growth, underpinned by sound macroeconomic fundamentals and prudent macroeconomic policies.”The central bank flagged elevated global economic and trade policy uncertainties, which are testing the resilience of financial systems across countries. “Financial markets remain volatile, especially core government bond markets, driven by shifting policy and geopolitical environment. Alongside, existing vulnerabilities such as soaring public debt levels and elevated asset valuations have the potential to amplify fresh shocks,” the RBI said.On the domestic front, the report said the financial system remains stable, with healthy balance sheets of both banks and non-banking financial institutions. “Financial conditions have eased supported by accommodative monetary policy and low volatility in financial markets. The strength of the corporate balance sheets also lends support to overall macroeconomic stability,” it added.The RBI said the soundness of scheduled commercial banks (SCBs) has been bolstered by robust capital buffers, a multi-decadal low non-performing asset (NPA) ratio, and strong earnings. Macro stress tests indicate that aggregate capital levels of SCBs would remain above the regulatory minimum even under adverse stress scenarios.Urban cooperative banks (UCBs) have strengthened their capital positions, while non-banking financial companies (NBFCs) remain well-capitalised. The consolidated solvency ratios for both life and non-life insurance firms continue to exceed minimum requirements. Stress testing of mutual funds and clearing corporations also confirmed their resilience to shocks.According to the systemic risk survey conducted by the RBI in May 2025, all major risk groups remain in the ‘medium risk’ category. About 92% of respondents expressed confidence in the soundness of the Indian financial system, though nearly two-thirds felt the stability of the global financial system was weakening.The central bank identified geopolitical conflicts, capital outflows, and trade disruptions as key near-term risks to domestic financial stability.