RBI Maintains SBI, HDFC Bank, and ICICI Bank as D-SIBs

The Reserve Bank of India (RBI) has confirmed that State Bank of India (SBI), HDFC Bank, and ICICI Bank will continue to be classified as Domestic Systemically Important Banks (D-SIBs), with an increase in additional capital requirements for SBI and HDFC Bank starting April 2025. The D-SIB framework, introduced by RBI in 2014 and updated in 2023, designates these banks as too significant to fail due to their size, complexity, and interconnectedness in the financial system. These banks are subject to higher capital buffers to ensure financial stability.

Key Points of D-SIB Classification

SBI, HDFC Bank, and ICICI Bank Status: These three banks remain D-SIBs, as initially identified by RBI in 2015 (SBI), 2016 (ICICI), and 2017 (HDFC Bank).

Capital Buffer Adjustments: SBI’s additional Common Equity Tier 1 (CET1) requirement will rise to 0.80% of risk-weighted assets (RWAs) from 0.60% in 2025. Similarly, HDFC Bank’s CET1 will increase to 0.40% from 0.20%.

D-SIB Framework and Implications

Purpose of D-SIBs: Banks classified as D-SIBs are crucial for maintaining financial stability. Their failure could disrupt essential banking services and have widespread economic consequences.

Capital Requirements: The CET1 capital surcharge is applied in addition to the capital conservation buffer, ensuring these banks remain financially resilient in case of a crisis.

Updated D-SIB List for 2024: As part of its ongoing monitoring, RBI has released the updated list for 2024, maintaining the D-SIB status of these banks.

Future Outlook for SBI and HDFC Bank

From April 1, 2025, the increased CET1 requirement for SBI and HDFC Bank will ensure that they are better capitalized to handle financial stress, contributing to the overall stability of the Indian banking system.

Summery of the News