The RBI on Thursday said banks' gross NPA ratio has fallen to a seven-year low of 5% and the banking system remains sound and well-capitalised.
In the 26th issue of the Financial Stability Report, the RBI also said the global economy is facing formidable headwinds with recessionary risks looming large.
The interplay of multiple shocks has resulted in tightened financial conditions and heightened volatility in financial markets, it said.
"The Indian economy is confronting strong global headwinds. Yet, sound macroeconomic fundamentals and healthy financial and non-financial sector balance sheets are providing strength and resilience and engendering financial system stability," the report said.
In the foreword to the report, RBI Governor Shaktikanta Das said the central bank recognises the destabilising potential of global risks, even as it draw strength from the robust macroeconomic fundamentals of the Indian economy.
"The Reserve Bank and the other financial regulators remain vigilant and in readiness to ensure the stability and soundness of our financial system through appropriate interventions, whenever necessary, in the best interest of the Indian economy," he said.
On inflation, the report said though prices are elevated, frontloading of monetary policy actions and supply side interventions are easing the pressure.
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