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Domestic Systemically Important Banks

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    22nd Jan, 2021

The Reserve Bank of India released a list of Domestic Systemically Important Banks (D-SIBs) based on the Framework for dealing with D-SIBs.

Who are D-SIBs?

  • SBI, ICICI Bank, and HDFC Bank are identified as Domestic Systemically Important Banks (D-SIBs).
  • These banks are considered 'too big to fail banks'.
  • SIBs are subjected to higher levels of supervision so as to prevent disruption in financial services in the event of any failure.
  • These banks also enjoy certain advantages in funding markets.

D-SIB framework

  • The D-SIB framework requires the Reserve Bank to disclose the names of banks designated as D-SIBs starting from 2015 and place these banks 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 (CET1) requirement for D-SIBs was phased-in from April 1, 2016 and became fully effective from April 1, 2019.
    • The additional CET1 requirement will be in addition to the capital conservation buffer.