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- The Reserve Bank of India (RBI) announced that the State Bank of India (SBI), ICICI Bank and HDFC Bank will continue to be identified as Domestic Systemically Important Banks (D-SIBs).
About Domestic Systemically Important Banks
- D-SIBs are financial institutions that are large enough where they cannot be allowed to fall.
- RBI places D-SIBs in appropriate buckets depending upon their Systemic Importance Scores (SISs).
- The central bank’s current update on D-SIBs is based on the data collected from banks as of March 31, 2021.
- A failure of any of these banks can lead to systemic and significant disruption to essential economic services across the country and can cause an economic panic.
- Based on the bucket in which a D-SIB is placed, an additional common equity requirement is applied to it.
- Under bucket 1, banks require 0.2 per cent of additional common equity Tier 1 capital as a percentage of risk-weighted assets (RWAs), and under bucket 3, banks require 0.6 percent of additional common equity Tier 1 capital as a percentage of RWAs.
- SBI is placed in the third bucket and private sector lenders ICICI Bank and HDFC Bank fall under bucket 1.
- Under bucket 1, banks require 0.2 per cent of additional common equity Tier 1 capital as a percentage of risk-weighted assets (RWAs), and under bucket 3, banks require 0.6 percent of additional common equity Tier 1 capital as a percentage of RWAs.
Source:BS
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