{"id":70040,"date":"2023-12-30T19:09:55","date_gmt":"2023-12-30T13:39:55","guid":{"rendered":"https:\/\/pwonlyias.com\/stage\/?post_type=current-affairs&#038;p=70040"},"modified":"2024-01-01T17:31:50","modified_gmt":"2024-01-01T12:01:50","slug":"reserve-bank-of-india-list-d-sibs","status":"publish","type":"current-affairs","link":"https:\/\/pwonlyias.com\/stage\/current-affairs\/reserve-bank-of-india-list-d-sibs","title":{"rendered":"Domestic Systemically Important Banks (D-SIBs)"},"content":{"rendered":"<p><b>Context: <\/b><span style=\"font-weight: 400;\">Recently, <\/span><b>the Reserve Bank of India (RBI)<\/b><span style=\"font-weight: 400;\"> issued its list of Domestic Systemically Important Banks (D-SIBs).\u00a0<\/span><\/p>\n<h2><span style=\"font-size: 24pt;\"><b>RBI Releases Latest List of Domestic Systemically Important Banks<\/b><\/span><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>RBI&#8217;s Updated Categorization<\/b><span style=\"font-weight: 400;\">: <\/span><span style=\"font-weight: 400;\">RBI moved State Bank of India (SBI) and HDFC Bank to higher buckets in its latest update. At the same time, ICICI Bank continues to be in the same bucketing structure as last year.<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">SBI (buckets 3 to 4) and HDFC Bank (buckets 1 to 2).<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Basis of Updation:<\/b><span style=\"font-weight: 400;\"> The current update is based on <\/span><b>the factoring in the increased systemic importance of HDFC Bank<\/b><span style=\"font-weight: 400;\"> post the merger of erstwhile HDFC Limited into HDFC Bank on July 1, 2023.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Common Equity Requirement: <\/b><span style=\"font-weight: 400;\">Based on the bucket in which a D-SIB is placed, an additional<\/span><b> common equity requirement<\/b><span style=\"font-weight: 400;\"> must be applied.<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Common Equity Tier 1 (CET1)<\/b><span style=\"font-weight: 400;\"> is a <\/span><b>component of Tier 1 capital<\/b><span style=\"font-weight: 400;\"> primarily common stock held by a bank or other financial institution.\u00a0<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2><span style=\"font-size: 24pt;\"><b>About Domestic Systemically Important Banks (D-SIBs)<\/b><\/span><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The Reserve Bank issued the<\/span><b> Framework for dealing with Domestic Systemically Important Banks (D-SIBs) in 2014.\u00a0<\/b><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The D-SIB framework requires the Reserve Bank<\/span><b> to disclose the names of banks designated as D-SIBs starting from 2015<\/b><span style=\"font-weight: 400;\"> and place them in appropriate buckets depending on their Systemic Importance Scores (SISs).\u00a0<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Based on the bucket in which a D-SIB is placed, an additional common equity requirement must be applied.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>\u2018Too big to fail\u2019:\u00a0 <\/b><span style=\"font-weight: 400;\">D-SIB means that the bank is<\/span><b> \u2018too big to fail\u2019.\u00a0<\/b><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Potential Ramifications of Failure<\/b><span style=\"font-weight: 400;\">: <\/span><span style=\"font-weight: 400;\">If <\/span><b>a bank fails, there would be significant disruption to the essential services<\/b><span style=\"font-weight: 400;\"> it provides to the banking system and the overall economy.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<table style=\"width: 100.26%;\">\n<tbody>\n<tr>\n<th style=\"width: 100%; border-style: solid; border-color: #000000; background-color: rgba(184, 165, 217, 0.53); text-align: left; vertical-align: middle;\">\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400; color: #000000;\">Banks in bucket 1 must maintain a 0.15% incremental tier-I capital from April 2018.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400; color: #000000;\">Banks in bucket 3 have to maintain an additional 0.45%.\u00a0<\/span><\/li>\n<\/ul>\n<\/th>\n<\/tr>\n<\/tbody>\n<\/table>\n<h3><span style=\"font-size: 18pt;\"><b>Key Features of the Domestic Systemically Important Banks (D-SIBs)<\/b><\/span><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Government Support<\/b><span style=\"font-weight: 400;\">: The too-big-to-fail tag also indicates that the government is expected to support these banks in case of distress.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Classification: <\/b><span style=\"font-weight: 400;\">RBI classifies the banks under five buckets depending on the order of importance.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Factors Contributing to Systemic Importance: <\/b><span style=\"font-weight: 400;\">These banks become systemically important due to their size, cross-jurisdictional activities, complexity and lack of substitute and interconnection.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Quantitative Criterion:<\/b> <span style=\"font-weight: 400;\">Banks whose assets <\/span><b>exceed 2% of GDP<\/b><span style=\"font-weight: 400;\"> are considered part of this group.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Enhanced Capital Requirements:<\/b> <span style=\"font-weight: 400;\">Due to their economic and national importance, the banks need to maintain a higher share of risk-weighted assets as tier-I equity.<\/span><\/li>\n<\/ul>\n<p><b>News Source:<\/b><span style=\"font-weight: 400;\">\u00a0<\/span><a href=\"https:\/\/www.livemint.com\/Money\/upgJdqnXhiYJWWPutEcT1J\/What-is-a-domestic-systemically-important-bank.html\" target=\"_blank\" rel=\"nofollow noopener\"><span style=\"font-weight: 400;\">Livemint<\/span><\/a><\/p>\n<p>\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"<p>RBI issued its list of Domestic Systemically Important Banks (D-SIBs).<\/p>\n","protected":false},"author":11,"featured_media":0,"menu_order":0,"comment_status":"open","ping_status":"open","template":"","format":"standard","meta":{"rank_math_lock_modified_date":false,"footnotes":""},"tags":[],"paper-wise":[2089],"subject":[2100],"acf":[],"_links":{"self":[{"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/current-affairs\/70040"}],"collection":[{"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/current-affairs"}],"about":[{"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/types\/current-affairs"}],"author":[{"embeddable":true,"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/users\/11"}],"replies":[{"embeddable":true,"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/comments?post=70040"}],"version-history":[{"count":3,"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/current-affairs\/70040\/revisions"}],"predecessor-version":[{"id":70485,"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/current-affairs\/70040\/revisions\/70485"}],"wp:attachment":[{"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/media?parent=70040"}],"wp:term":[{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/tags?post=70040"},{"taxonomy":"paper-wise","embeddable":true,"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/paper-wise?post=70040"},{"taxonomy":"subject","embeddable":true,"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/subject?post=70040"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}