Daily News Analysis

Domestically Systemic Important Banks

8th January, 2022 Economy

Figure 4: No Copyright Infringement Intended

Context:

  • The Reserve Bank of India (RBI) has announced that the State Bank of India (SBI), ICICI Bank, and HDFC Bank will continue to be identified as the national systemically important banks (DSIB).

Systemic bank that is important to the domestic system

  • DSIB is a very large financial institution and will not collapse.
  • RBI assigns DSIBs to the appropriate categories based on the System Importance Score (SIS).
  • The central bank's current DSIB update is based on data collected by banks as of March 31, 2021.
  • The bankruptcy of any of these banks can cause systematic and serious disruption to important economic services across the country and cause economic panic.

 

 

Parameters:

  • Additional capital requirements apply based on the bucket in which the DSIB is located.
    • In Category 1, banks require an additional CET1 capital of 0.2% as a percentage of risk-weighted assets (RWA),
    • in Category 3, banks require an additional CET1 capital of 0.6% as a percentage of RWA. increase.
  • SBI falls into the third category, and private lenders ICICI Bank and HDFC Bank fall into category 1.