The Reserve Bank of India (RBI) has retained State Bank of India, ICICI Bank and HDFC Bank as home systemically vital banks (D-SIBs) or banks which can be thought of as “too big to fail”.
The D-SIB framework requires the Reserve Bank to reveal the names of banks designated as D-SIBs ranging from 2015 and place these banks in acceptable buckets relying upon their systemic significance scores (SISs). “Based on the bucket in which a D-SIB is placed, an additional common equity requirement has to be applied to it,” the RBI mentioned.
According to analysts, too large to fail is a phrase used to explain a financial institution or firm that’s so entwined within the financial system that its failure can be catastrophic.
In case a overseas financial institution having department presence in India is a worldwide systemically vital financial institution (G-SIB), it has to keep up extra CET1 capital surcharge in India as relevant to it as a G-SIB, proportionate to its danger weighted property (RWAs) in India — extra CET1 buffer prescribed by the house regulator multiplied by India RWA as per consolidated world group books divided by complete consolidated world group RWA, it mentioned.
Based on the methodology offered within the D-SIB framework and information collected from banks as of March 31, 2015 and March 31, 2016, the Reserve Bank had introduced State Bank of India and ICICI Bank as D-SIBs on August 31, 2015 and August 25, 2016, respectively, the RBI mentioned.
“Based on data collected from banks as on March 31, 2017 and March 31, 2018, the Reserve Bank had announced State Bank of India, ICICI Bank and HDFC Bank as D-SIBs on September 04, 2017 and March 14, 2019 respectively. Current update is based on the data collected from banks as on March 31, 2020,” the central financial institution mentioned. The Reserve Bank had issued the framework for coping with home systemically vital banks on July 22, 2014.