SBI, ICICI Bank and HDFC Bank continue to be in the Reserve Bank of India’s list of Domestic Systemically Important Banks (D-SIBs) for 2018.
D-SIBs are required to maintain higher capital as compared to other banks. The additional Common Equity Tier 1 (CET1) requirement for D-SIBs has already been phased-in from April 1, 2016, and will become fully effective from April 1, 2019, the RBI said, releasing the list for 2018.
According to an official release, banks will have to set aside more capital for their continued operation. RBI comes with the list every year since 2015. Inclusion in D-SIB indicates that failure of any of these banks would have a cascading effect on Indian financial system. Inclusion in the list gives additional comfort to investors that these banks won’t be allowed to fail and therefore, borrowing costs of these banks from the markets are cheaper than their peers. SBI, being in the third bucket, was setting aside 0.45 per cent of its assets till 2018-19 as a surcharge. From next year, applicable from April 1, the bank will have to set aside 0.60 per cent of its risk-weighted assets. The increase in capital is in a phased manner, with the ultimate aim of providing one full percentage point extra as capital buffer for D-SIBs. ICICI Bank and HDFC Bank’s capital requirement rises to 0.20 per cent, from 0.15 per cent now. These two banks are in the fifth basket, and are considered less important than SBI.