RBI recently announced that State Bank of India, ICICI Bank, and HDFC Bank continue to be identified as systemically important banks in India. The additional common equity tier 1 requirement as a percentage of risk-weighted assets is 0.6% for the State Bank of India while this requirement is 0.2% for HDFC Bank and ICICI Bank; this capital requirement will be in addition to the capital conservation buffer.
The additional common equity tier 1 requirement for domestic systemically important banks was phased-in from April 01, 2016 and became fully effective from April 01, 2019. RBI had issued the framework for domestic systemically important banks on July 22, 2014. This framework requires RBI to disclose the names of banks designated as domestic systemically important banks and place these banks in appropriate buckets, depending on their Systemic Importance Scores. Based on the bucket in which such a bank is placed, an additional common equity requirement has to be applied to it. In case a foreign bank with a branch in India is a global systemically important bank or G-SIB, it has to maintain additional common equity tier 1 capital surcharge in India as applicable to it as a G-SIB, proportionate to its risk-weighted assets in India.
Keywords: Asia Pacific, India, Banking, D-SIBs, Basel, Regulatory Capital, Systemic Risk, RBI
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