<h1 class="ql-align-center"><strong style="color: rgb(230, 0, 0);">Domestic Systemically Important Banks</strong></h1><p class="ql-align-center"><br></p><h3><strong>Context&nbsp;</strong></h3><ul><li class="ql-indent-1">The Reserve Bank of India (RBI) has released the 2022 list of <strong>Domestic Systemically Important Banks (D-SIBs).</strong></li><li class="ql-indent-2"><strong>State Bank of India, ICICI Bank, and HDFC Bank</strong> have again been named as Domestic Systemically Important Banks (D-SIBs) by RBI in the 2022 list.</li></ul><p><br></p><h3><strong>What is a Systemically Important Bank?</strong></h3><ul><li class="ql-indent-1">SIBs are perceived as certain big banks in the country/world. They enjoy a huge customer base and also engage in cross sector activities (insurance/pension). They are perceived as<strong> ‘Too Big to Fail (TBTF)’.</strong></li><li class="ql-indent-1">As they command such a huge consumer base as well have NBFC subsidiary therefore they have expectation of government support at the time of distress</li><li class="ql-indent-1">Due to this perception these banks may indulge in reckless practices.</li><li class="ql-indent-1">There are two types of SIBs:</li><li class="ql-indent-2"><strong>Global SIBs; t</strong>he identified by <strong>BCBS (BASEL Committee on Banking Supervision)</strong></li><li class="ql-indent-2">D<strong>omestic SIBs;</strong> by central Bank of the country</li></ul><p><br></p><h3><strong>Domestic Systemically Important Banks</strong></h3><ul><li class="ql-indent-1"><strong>Since 2015</strong>, the RBI has been releasing the list of all D-SIBs.</li><li class="ql-indent-1">They are classified into five buckets, according to their importance to the national economy.</li><li class="ql-indent-1">In order to be listed as a D-SIB, a bank needs to have assets that exceed 2 percent of the national GDP.</li><li class="ql-indent-1">The banks are then further classified on the level of their importance across the <strong>five buckets.</strong></li><li class="ql-indent-1">ICICI Bank and HDFC Bank are in bucket one while SBI falls in bucket three, with<strong> bucket five representing the most important D-SIBs.</strong></li></ul><p><br></p><h3><strong>Implication&nbsp;</strong></h3><ul><li class="ql-indent-1">Due to their economic and national importance, the banks need to maintain a higher share of risk-weighted assets as tier-I equity.</li><li class="ql-indent-1">SBI, since it is placed in bucket three of D-SIBs, <strong>has to maintain Additional Common Equity Tier 1 (CET1) at 0.60 percent of its Risk-Weighted Assets (RWAs).</strong></li><li class="ql-indent-1">ICICI and HDFC on the other hand, have to maintain Additional CET1 at 0.20 percent of their RWA due to being in bucker one of D-SIBs.</li></ul><p class="ql-align-center"><br></p><h1 class="ql-align-center"><strong>PRELIMS NOTES:</strong><a href="https://www.sunyaias.com/prelims-tests/upsc-cse-prelims-2023" rel="noopener noreferrer" target="_blank" style="color: rgb(0, 102, 204);"><strong>CLICK HERE</strong></a></h1><p><br></p>