Domestic Systemically Important Banks (D-SIBs) .
The Reserve Bank of India (RBI) has designated State Bank of India (SBI), HDFC Bank, and ICICI Bank as Domestic Systemically Important Banks (D-SIBs) and has placed them in specific buckets based on their Systemic Importance Scores (SISs).
SBI has been shifted from bucket 3 to bucket 4, and HDFC Bank from bucket 1 to bucket 2. ICICI Bank continues to maintain its previous categorization of bucket 1.
The higher D-SIB surcharge for SBI and HDFC Bank will be applicable from April 1, 2025. The additional Common Equity Tier 1 (CET1) requirement will be in addition to the capital conservation buffer.For SBI and HDFC Bank, the higher D-SIB buffer requirements resulting from the bucket increase will be effective from April 1, 2025.
The additional Common Equity Tier 1 (CET1) requirement will be in addition to the capital conservation buffer.D-SIB Framework:
The D-SIB framework requires the RBI to disclose the names of banks designated as D-SIBs and place them in appropriate buckets based on their SISs.
Based on the bucket in which a D-SIB is placed, an additional common equity requirement is applied.
Foreign Banks with Branch Presence in India:In the case of a foreign bank with a branch presence in India that is a Global Systemically Important Bank (G-SIB), it must maintain an additional CET1 capital surcharge in India, proportionate to its Risk Weighted Assets (RWAs) in India.
D-SIBs are banks that are considered “too big to fail,” meaning their failure could have severe implications for the overall economy. The concept of D-SIBs was introduced globally in the aftermath of the 2008 financial crisis to address the risks posed by large and interconnected banks.
The Life Insurance Corporation of India (LIC), General Insurance Corporation of India and The New India Assurance Co have been identified as
Domestic Systemically Important Insurers (D-SIIs) for 2020-21 by Insurance Regulatory and Development Authority of India (IRDAI).
Determination of D-SIBs:
Factors Considered: The RBI determines D-SIBs based on factors such as size, complexity, lack of substitutability, and interconnectedness with the financial system.
Classification into Buckets: D-SIBs are classified into five buckets based on their importance to the national economy.
Asset Threshold: To be designated as a D-SIB, a bank must have assets exceeding 2 percent of the national GDP.
Regulatory Requirements: D-SIBs are subject to higher regulatory requirements. They need to maintain a higher share of risk-weighted assets as tier-I equity.
Regulatory Requirements for D-SIBs:
Additional Capital: D-SIBs are required to maintain Additional Common Equity Tier 1 (CET1) capital based on their risk-weighted assets.
Risk Mitigation: These requirements aim to mitigate the risks associated with the failure of a D-SIB and ensure their ability to absorb losses.
