RBI retains SBI, HDFC Bank and ICICI Bank as systemically important banks

RBI on Tuesday said SBI, HDFC Bank and ICICI Bank will remain domestic systemically important banks, requiring them to hold extra capital buffers based on their systemic importance

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The Reserve Bank of India (RBI) said on Tuesday that State Bank of India (SBI), HDFC Bank, and ICICI Bank will continue to be classified as systemically important banks.

 

Systemically important banks are ones which are too big to fail due to their size, cross-jurisdictional activities, complexity, lack of substitutability, and interconnectedness. The disorderly failure of these banks has the potential to cause significant disruption to the essential services they provide to the banking system, and in turn, to the overall economic activity.

 

According to RBI, while SBI must maintain an additional capital requirement of 0.80 per cent of its risk-weighted assets, HDFC Bank is required to maintain an additional 0.40 per cent, and ICICI Bank 0.20 per cent.

 

RBI had announced SBI and ICICI Bank as domestic systemically important banks (D-SIB) in 2015 and 2016. In 2017, HDFC Bank was added to the list.

 

The D-SIB framework, which was issued in 2014 by RBI, requires the central bank to disclose the names of banks designated as D-SIBs and place these banks in appropriate buckets depending upon their systemic importance scores (SISs).

 

Based on the bucket in which a D-SIB is placed, an additional common equity requirement has to be applied to it.