Financial Insights

SBI, HDFC Bank and ICICI Bank systemically important: RBI

In a press release, the Reserve Bank of India has released a list of Domestic Systemically Important Banks (D-SIBs) wherein it has identified the state-owned lender SBI and private lenders HDFC and ICICI Bank as systemically important banks, within which they have been deemed as banks ‘too big to fail’. RBI considers factors like size, complexity, lack of substitutability, etc. when finalizing such a list.

In order to be listed as a D-SIB, a bank must have assets that exceed 2% of the national GDP. They are classified into 5 buckets according to their importance to the national economy. HDFC and ICICI falls under bucket 1 while SBI falls under bucket 3. Under bucket 1, banks are required a 0.2 per cent of additional common equity Tier 1 capital as a percentage of risk weighted assets (RWAs), and under bucket 3, banks are required a 0.6 per cent of additional common equity Tier 1 capital as a percentage of RWAs.

The RBI had identified SBI as a D-SIB in 2015, ICICI as one in 2016 and HDFC in 2017. All three banks have been recognized as D-SIBs in the same bucket as 2020.

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