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SBI, ICICI Bank, HDFC Bank remains in the 2020 list of D-SIBs

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SBI, ICICI Bank, HDFC Bank remain systemically important bankOn January 19, 2021, the Reserve Bank of India (RBI) released the 2020 list of Domestic Systemically Important Banks (D-SIBs) on the basis of data collected from banks as on March 31, 2020.

  • As per the list SBI (State Bank of India), ICICI (Industrial Credit and Investment Corporation of India), and HDFC (Housing Development Finance Corporation Limited) Bank continue to be D-SIBs or institutions which are ‘too big to fail (TBTF)’.

Key Points:

–The D-SIB framework classifies banks under five buckets depending on order of importance. In accordance with this ICICI Bank and HDFC Bank are in bucket one while SBI is in bucket three.

— The additional CET (Common Equity Tier)-1 requirement as a percentage of Risk Weighted Assets (RWAs) in case of the SBI is 0.6%, while for the other two banks it is 0.2%.

What are D-SIBs?

These are systemically important due to their size, cross-jurisdictional activities, complexity and lack of substitute. The assets of the bank exceeding 2% of GDP (Gross Domestic Product) are considered part of this group. If such a D-SIB fails, there would be significant disruption in the banking system and the overall economy.

  • In case of distress, the government also support these banks therefore these banks enjoy certain advantages in funding.

About D-SIB framework:

The framework was issued by RNI in July 2014. In accordance to this, RBI has to disclose the names of banks designated as D-SIBs 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, an additional common equity requirement applies.

  • In case a foreign bank having branch presence in India is a Global Systemically Important Bank (G-SIB).

Recent Related News:

i.In accordance with the paper authored by Reserve Bank of India (RBI) Deputy Governor Michael Debabrata Patra and another official Harendra Kumar Behera, maintaining an inflation rate of 4% is appropriate for India.

ii.On October 22, 2020, RBI issued the revised regulatory framework for housing finance companies (HFCs) under which the minimum net owned funds (NOF) size for HFCs is fixed at Rs 25 crore.

About Reserve Bank of India (RBI):

Headquarters– Mumbai, Maharashtra
Formation– 1 April 1935
Governor– Shaktikanta Das
Deputy Governors– 4 (Bibhu Prasad Kanungo, Mahesh Kumar Jain, Michael Debabrata Patra, M. Rajeshwar Rao)