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HDFC Bank among RBI list of 'too big to fail' lenders along with SBI, ICICI

India's largest lender SBI and private sector major ICICI Bank were classified as D-SIBs in 2015

Press Trust of India  |  Mumbai 


RBI on Monday included Bank in the list of 'too big to fail' lenders, referred to as or domestic systemically important bank.

India's largest lender SBI and private sector major were classified as D-SIBs in 2015.

With the inclusion of Bank in the list, there will now be three 'too big to fail' financial entities in the country.

SIBs are subjected to higher levels of supervision so as to prevent disruption in financial services in the event of any failure.

"The additional (CET1) requirement for D-SIBs has already been phased-in from April 1, 2016 and will become fully effective from April 1, 2019," the Reserve Bank said in a statement.

The additional CET1 or core capital requirement will be in addition to the capital conservation buffer, it added.

RBI had issued the framework for dealing with D-SIBs in July 2014.

According to the framework, RBI has to disclose the names of designated as D-SIBs every year in August starting from 2015 and place these in appropriate buckets depending upon their Systemic Importance Scores (SISs).

SIBs are seen as 'too big to fail (TBTF)', creating an expectation of government support for them in times of financial distress. These also enjoy certain advantages in funding markets.

On the downside, according to some experts, expectations of government support amplifies risk-taking, reduces market discipline, creates competitive distortions and increases the probability of distress in future.

First Published: Tue, September 05 2017. 08:25 IST