New Delhi, June 30 -- 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, RBI said in its latest Financial Stability Report.

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 highlights of the RBI report read.

The domestic financial ...