The Reserve Bank of India (RBI) has announced that State Bank of India (SBI) and HDFC Bank continue to be identified as domestic systemically important banks (D-SIBs). In the latest update, ICICI Bank retains its position in the same category as the previous year, while SBI and HDFC Bank have been moved to higher buckets.
The new categorization brings additional Common Equity Tier 1 (CET1) requirements, effective from April 1, 2025. SBI and HDFC Bank will face higher D-SIB buffer requirements due to the bucket increase. The additional CET1 requirements are in addition to the capital conservation buffer.
Here’s the updated list of D-SIBs and their corresponding additional CET1 requirements:
– Bucket 5: No Bank Listed
– Bucket 4: State Bank of India – 0.80%
– Bucket 3: No Bank Listed
– Bucket 2: HDFC Bank – 0.40%
– Bucket 1: ICICI Bank – 0.20%
The data used for this update is collected from banks as of March 31, 2023. The adjustment for HDFC Bank considers its increased systemic importance following the merger with erstwhile HDFC Ltd on July 1, 2023.
The RBI clarifies that the higher D-SIB surcharge for SBI and HDFC Bank will be applicable from April 1, 2025. Until then, the D-SIB surcharge for SBI and HDFC Bank will be 0.60% and 0.20%, respectively.
The framework for domestic systemically important banks was introduced by the RBI in 2014. The classification places banks into buckets based on their systemic importance scores (SISs), and an additional common equity requirement applies to each D-SIB based on its bucket positioning.
In related news, the RBI’s 28th edition of the Financial Stability Report (FSR) reveals positive trends in the country’s financial system. The report notes an improvement in commercial banks’ asset quality, with the gross non-performing asset (GNPA) ratio easing to 3.2% at the end of September.
RBI Governor Shaktikanta Das emphasized the commitment to act early and decisively to prevent risk build-up. The FSR highlights key policy priorities, including achieving durable price stability, ensuring medium-term debt sustainability, strengthening financial sector resilience, promoting new growth opportunities, and fostering inclusive and green growth.
Despite tightening norms for personal loans and credit cards last month, the RBI sees India as one of the fastest-growing major economies globally, with a rising potential growth profile. The tightened rules, aimed at higher capital requirements, may impact loan growth in these categories. The RBI remains vigilant, acting preemptively to address risks in the evolving economic landscape.