D-SIBs: These banks are deemed as strategically important and are ‘Too big to fail’. The government supports these banks in times of distress.
New Delhi: In the latest development, the Reserve Bank of India (RBI) has kept the State Bank of India (SBI), HDFC Bank and ICICI Bank in the list of Domestic Systematically Important Banks (D-SIBs). These banks are deemed as strategically important and are ‘Too big to fail’. The government supports these banks in times of distress.
In the statement released on Tuesday, the RBI said, “SBI, ICICI Bank and HDFC Bank continue to be identified as Domestic Systemically Important Banks (D-SIBs), under the same bucketing structure as in the 2020 list of D-SIBs”. SBI was put in the list of D-SIBs in 2015 and HDFC and ICICI banks were added later.
The current list has been made based on the data collected on March 31, 2021. The SBI has been put under the third bucket of Additional Common Equity Tier 1 requirement. It requires the bank to maintain the percentage of Risk-Weighted Assets (RWAs) at 0.6 per cent. HDFC Bank and ICIC Bank have been put under the first bucket, where they are required to maintain the percentage at 0.2 per cent.
What are Domestic Systematically Important Banks (D-SIBs)?
- These are strategically important banks for the nation.
- These banks are perceived as ‘Too Big To Fail’ (TBTF).
- The decision is made based on the size, complexity, lack of substitutability and interconnectedness of the banks.
- The failure of these banks may lead to disruption in the essential services and overall economic health of the nation.
