SBI, HDFC Bank, ICICI Bank retained in RBI’s list of ‘too-big-to-fail’ banks

The Reserve Bank of India released its latest list of Domestic Systemically Important Banks (D-SIBs). The list includes State Bank of India, HDFC Bank, and ICICI Bank. 

“SBI, HDFC Bank and ICICI Bank continue to be identified as Domestic Systemically Important Banks (D-SIBs) under the same bucketing structure as in the 2023 list of D-SIBs. The additional Common Equity Tier 1 (CET1) requirement for these D-SIBs will be in addition to the capital conservation buffer,” stated the apex bank in a notification on Wednesday. 

Meanwhile, banking stocks took a beating in Wednesday's trading session. ICICI Bank shares were last seen trading 0.67 per cent lower at Rs 1,262. HDFC Bank was down 1.04 per cent at Rs 1,700.45. State Bank of India (SBI) shares fell 1.55 per cent to trade at Rs 813.60. 

Systemically important banks are financial institutions identified by the RBI whose failure or distress could trigger a broader financial crisis as well as threaten the stability of the entire financial system. Hence, they are perceived as “too big to fail”. 

The framework for D-SIBs was issued in July 2014. SBI and ICICI Bank were identified as D-SIBs in 2015 and 2016, while HDFC Bank was classified as D-SIB in 2017, apart from SBI and ICICI Bank. 

Also as per the D-SIB requirements, SBI and HDFC Bank would need to maintain an additional capital buffer starting April 2025. As per the framework, the designated banks are placed in appropriate buckets, depending on their systemic importance. A higher bucket requires the lender to maintain a larger capital buffer, apart from other financial metrics.

The RBI said that SBI’s capital requirement will increase by 20 basis points to 80 per cent from 60 per cent now, and HDFC Bank’s will increase 20 basis points to 40 per cent from 20 per cent currently. ICICI Bank will be required to maintain a capital requirement of 20 per cent.