Mumbai, Jun 30 (PTI) Indian economy remains a key driver of global growth on the back of sound macroeconomic fundamentals and prudent policies, the Reserve Bank said on Monday.

In its bi-annual Financial Stability Report (FSR), the central bank also said elevated economic and trade policy uncertainties are testing the resilience of the global economy and the financial system.

"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 Reserve Bank of India (RBI) said.

Despite an uncertain and challenging global economic backdrop, it said the Indian economy remains a key driver of global growth, “underpinned by sound macroeconomic fundamentals and prudent macroeconomic policies”.

"The domestic financial system is exhibiting resilience fortified by healthy balance sheets of banks and non-banks. 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," the RBI said.

According to the report, the soundness and resilience of scheduled commercial banks (SCBs) are bolstered by robust capital buffers, multi-decadal low non-performing loans ratio and strong earnings.

Results of macro stress tests affirm that most SCBs have adequate capital buffers relative to the regulatory minimum even under adverse stress scenarios. Stress tests also validate the resilience of mutual funds and clearing corporations, it added. PTI DP NKD RAM MR

Financial system resilience affirmed by RBI report, noting adequate bank capital buffers and robust stress-test outcomes. The FSR states the domestic financial system is resilient, with scheduled commercial banks holding robust capital buffers, low non performing loan ratios and strong earnings. Macro stress tests show most banks retain capital above regulatory minima even in adverse scenarios, and stress testing validates the resilience of mutual funds and clearing corporations. The report also warns that global policy uncertainty, market volatility, high public debt and elevated asset valuations could amplify shocks despite supportive monetary conditions.