SBI, ICICI Bank, HDFC Bank continue to remain systemically important banks: RBI

New Delhi: The RBI on Monday said state-owned SBI, along with private sector lenders ICICI Bank and HDFC Bank continues to be Domestic Systemically Important Banks (D-SIBs) or institutions that are 'too big to fail'. SIBs are perceived as banks that are 'too big to fail (TBTF)'. This perception of TBTF creates an expectation of government support for these lenders in times of distress. Due to this, these banks enjoy certain advantages in the funding markets.

"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 2021 list of D-SIBs," the Reserve Bank said in a statement. The additional Common Equity Tier 1 (CET1) requirement for D-SIBs was phased in from April 1, 2016, and became fully effective from April 1, 2019. (Also Read: New-year cheers! Liquor worth Rs 9 crores sold on Jan 1; THIS was the most sold drink in 2022)

The additional CET1 requirement will be in addition to the capital conservation buffer. The Reserve Bank of India (RBI) announced SBI and ICICI Bank as D-SIBs in 2015 and 2016. Based on data collected from banks as on March 31, 2017, HDFC Bank was also classified as a D-SIB. (Also Read: Explained: Why you can't buy lands in THESE states)

The current update is based on data collected from banks as on March 31, 2022. The framework for dealing with D-SIBs was issued in July 2014. The framework requires the RBI to disclose the names of banks designated as D-SIBs starting from 2015 and place these lenders in appropriate buckets depending upon their Systemic Importance 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 Additional Common Equity Tier 1 requirement as a percentage of Risk Weighted Assets (RWAs) in the case of SBI is 0.6 percent, and 0.2 percent for ICICI Bank and HDFC Bank.