The Reserve Bank of India (RBI) has announced that State Bank of India, HDFC Bank and ICICI Bank will continue to be classified as systemically important banks. These banks are considered too big to fail because of their size, scale of operations, complexity and the critical role they play in the financial system. Any disorderly failure could disrupt essential banking services and affect economic activity.
RBI said that SBI must maintain an additional capital requirement of 0.80 per cent of its risk weighted assets. HDFC Bank must maintain an additional 0.40 per cent and ICICI Bank 0.20 per cent.
SBI and ICICI Bank were first identified as domestic systemically important banks in 2015 and 2016. HDFC Bank was added to the list in 2017.
The D SIB framework, introduced by RBI in 2014, requires the central bank to publish the names of banks that are designated as systemically important. It also places these banks in specific buckets based on their systemic importance scores.
Each bucket carries an extra common equity requirement that the bank must maintain in addition to the minimum regulatory capital. This ensures stronger financial buffers for banks that have a larger impact on the stability of the financial system.
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