Domestically Systemic Important Banks

Context

• The Reserve Bank of India said that the State Bank of India, ICICI Bank, and HDFC Bank continue to be identified as Domestic Systemically Important Banks (D-SIBs).
  • The RBI announced SBI and ICICI Bank as D-SIBs in 2015 and 2016 while HDFC Bank was added to the list as on March 31, 2017.

What are Domestic- Systematically Important Banks (DSIBs)?

• DSIBs are also referred to as “Too Big To Fall” (TBTF) because of their size, cross jurisdictional activities, complexity and lack of substitute and interconnection.
• Banks whose assets cross 2% of the GDP are considered DSIBs. If these banks fail, they can have a disruptive effect on the economy. 
• D-SIBs are categorised under five buckets. According to these buckets the banks have to keep aside the Additional Common Equity Tier 1 as a percentage of Risk Weighted Assets (RWAs).
• D-SIBs are mandated under special provisions and are closely monitored by the central bank to ensure their better functioning and prevent the indulgence of such banks in any grey areas such as money laundering etc.
• The Systematically Important Banks domestically are identified by Central Banks of a country and globally by BASEL committee on banking supervision.
• At present State Bank of India is placed under Bucket 3 & HDFC and ICICI are under Bucket 1.

Source: ET