ICICI, SBI, And HDFC Remain Domestic Systemically Important Banks Says RBI

ICICI Bank, State Bank of India (SBI), and HDFC Bank have been identified as Domestic Systemically Important Banks (D-SIBs) by the Reserve Bank of India (RBI).

D-SIBs are interconnected entities, whose failure will have a cascading impact on the whole of the financial system and create instability. These banks are under close supervision and regulation of the RBI as they are too-big-to-fail. Bnaks of this magnitude are under the radar of central banks following the 2008 financial crisis. The RBI first issued the framework on July 22, 2014 which deal with D-SIBs. The framework requires the central bank to disclose the names of banks designated as D-SIBs starting from 2015 and place these banks in appropriate buckets depending upon their systemic importance.

In addition to the existing rules, D-SIBs will need to maintain additional Common Equity Tier 1 (CET1), over and above the usual capital buffer. SBI will have to maintain CET 1 of 0.60 per cent as a percentage of its risk-weighted assets as per the central bank. Similarly, HDFC Bank and ICICI Bank and need to maintain an additional 0.20 per cent each. Based on the bucket in which a D-SIB is placed, an additional common equity requirement has to be applied to it. Similarly, in case a foreign bank having branch presence in India is a Global Systemically Important Bank (G-SIB), it has to maintain additional CET1 capital surcharge in India as applicable by the rules concerning G-SIBs, the RBI rules say. The RBI had announced SBI and ICICI Bank as D-SIBs in 2015 and 2016. Based on data collected from banks as on March 31, 2017, HDFC Bank was also classified as a D-SIB, along with SBI and ICICI Bank.