RBI retains SBI, HDFC Bank & ICICI Bank in 'Systemically Important' category
Mumbai, Dec 2
The Reserve Bank of India announced on Tuesday that State Bank of India (SBI), HDFC Bank, and ICICI Bank will continue to be classified as the country’s systemically important banks.
The RBI had announced the SBI and the ICICI Bank as domestic systemically important banks (D-SIB) in 2015 and 2016. In 2017, the HDFC Bank was added to the list. The current update is based on the data collected from banks as on March 31, 2025, according to an official statement.
Systemically important banks are considered too big to fail due to their size, cross-jurisdictional activities, lack of substitutability and interconnectedness. Any failure of these banks has the potential to cause large-scale disruption to the essential services they provide to the banking system and overall economic activity.
Based on the bucket in which a D-SIB is placed, an additional common equity requirement has to be applied to it.
The RBI issued a directive on Tuesday that while the SBI must maintain an additional capital requirement of 0.80 per cent of its risk-weighted assets, the HDFC Bank is required to maintain an additional 0.40 per cent, and the ICICI Bank 0.20 per cent.
The D-SIB framework, which was issued in 2014 by the RBI, requires the central bank to disclose the names of banks designated as D-SIBs and place these banks in appropriate buckets depending upon their systemic importance scores (SISs).
The Reserve Bank had issued the ‘Framework for dealing with Domestic Systemically Important Banks (D-SIBs)’ on July 22, 2014, which was subsequently updated on December 28, 2023.
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 (SIS).
In RBI parlance, Common Equity Tier 1 (CET1) requirements for Domestic Systemically Important Banks (D-SIBs) involve an additional CET1 capital surcharge above the standard Basel III requirements, with the exact percentage depending on which "bucket" the bank is placed in based on its systemic importance score.
Based on the bucket in which a D-SIB is placed, an additional CET1 requirement has to be applied to it. In case a foreign bank having branch presence in India is a Global Systemically Important Bank (G-SIB), it has to maintain additional CET1 capital surcharge in India as applicable to it as a G-SIB, proportionate to its Risk Weighted Assets (RWAs) in India, i.e., additional CET1 buffer prescribed by the home regulator (amount) multiplied by India RWA as per consolidated global Group books divided by total consolidated global Group RWA.
— IANS
Reader Comments
As a customer of HDFC, this gives me confidence. Knowing my bank is considered 'too big to fail' and has to maintain higher capital buffers is reassuring for my savings and loans.
SBI at 0.80%, HDFC at 0.40%, ICICI at 0.20%... interesting to see the tiered approach based on their systemic importance score. Shows RBI is using data-driven metrics, not just gut feeling.
While the framework is robust, I hope this doesn't create an implicit guarantee that leads to riskier behavior by these banks. Moral hazard is a real concern with 'too big to fail' institutions globally.
The fact that no new bank has been added to this list since 2017 shows how dominant these three are. Will any other bank like Axis or Kotak ever reach this status? 🤔
As an investor, I appreciate the transparency. The D-SIB framework aligns with global standards (Basel III) and gives clear guidelines on capital requirements. This stability is good for long-term investment in the Indian banking sector.
Solid move by RBI. After seeing bank crises in other countries, it's crucial our financial system remains stable
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