RBI: 46 Banks Pass Stress Test, Capital Stable

The Reserve Bank of India (RBI) has released its latest Financial Stability Report (FSR), which reviews the health of India’s financial system and its ability to handle risks. This report is prepared with input from the Financial Stability and Development Council (FSDC) and covers banks, non-banking financial companies (NBFCs), insurance, mutual funds, and the overall economy.

Key Takeaways:

Global Risks Are Rising

Uncertainty in the world economy—due to global conflicts, slowdowns, and changing trade policies—is creating more pressure on financial markets. High public debt and stretched valuations in global markets can lead to unexpected financial shocks.

India’s Economy Stays Strong

Despite global challenges, India continues to grow steadily. This strength comes from solid fundamentals, strong domestic demand, and careful economic management. Inflation is coming down, which also supports financial stability.

Banks Are in Good Shape

Scheduled Commercial Banks (SCBs) are well-prepared to handle stress. They have:

Strong capital buffers

Low bad loans (NPA levels at multi-decade lows)

Healthy profits

Stress test results show that all 46 major scheduled commercial banks can withstand even severe stress scenarios.

Capital to Risk-Weighted Assets Ratio (CRAR) may decline slightly from 17.2% to 17% by March 2027 in a normal scenario.

Under extreme situations, it may dip to 14.2% or 14.6%, but still stays above the required 9%.

CET1 ratio, another key indicator, stays above the 5.5% minimum even in adverse scenarios.

Gross NPAs may rise modestly to 5.6% at worst, but overall asset quality remains stable.

NBFCs & Cooperative Banks Are Stable

Non-Banking Financial Companies (NBFCs) are performing well, with strong capital levels and improved asset quality. Urban Cooperative Banks have also shown better financial health, with rising capital positions.

Insurance Sector is Sound

Both life and general insurance companies continue to maintain a solvency ratio well above the minimum limit. This means they are financially strong enough to meet long-term obligations.

Mutual Funds and Clearing Houses Are Resilient

Stress tests on mutual funds and clearing corporations show that they are capable of handling sudden market shocks without major issues.

Outlook

The global financial environment remains uncertain due to geopolitical tensions and uneven economic recovery. But India stands out with stable macroeconomic indicators, rising domestic consumption, and a robust financial system.

Supportive government policies, better corporate balance sheets, and well-capitalized financial institutions are helping India remain resilient. The Indian financial sector is in a strong position to support growth, even if global risks continue.