SBI, HDFC Bank, ICICI Bank remain domestic systematically important banks: RBI

While ICICI Bank remained in the same bucketing structure as last year, SBI and HDFC Bank were moved to higher buckets, according to the RBI.

While SBI was moved from Bucket 3 to Bucket 4, HDFC Bank was shifted from Bucket 1 to Bucket 2, according to the RBI report. | Image: PTI

State Bank of India (SBI), HDFC Bank, and ICICI Bank continue to be identified as domestic systemically important banks (D-SIBs), the Reserve Bank of India (RBI) said on Thursday. While ICICI Bank remained in the same bucketing structure as last year, SBI and HDFC Bank were moved to higher buckets.

For SBI and HDFC Bank, the higher D-SIB buffer requirements on account of the bucket increase will be effective from April 1, 2025, wherein the additional Common Equity Tier 1 (CET1) requirement will be in addition to the capital conservation buffer, the banking regulator said.

Here's the list of D-SIBs for the current year, as laid out by the RBI:

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Bucket	Bank	Additional Common Equity Tier 1 requirement as a percentage of risk weighted assets (RWAs)
5	-	1%
4	State Bank of India*	0.80%
3	-	0.60%
2	HDFC Bank*	0.40%
1	ICICI Bank	0.20%

The update is based on the data collected from banks, as of March 31, 2023, and the placement of HDFC Bank factors in the increased systemic importance of HDFC Bank after the merger of erstwhile HDFC Ltd into the lender on July 1, 2023, the RBI said.

"The higher D-SIB surcharge for SBI and HDFC Bank will be applicable from April 1, 2025. Hence, up to March 31, 2025, the D-SIB surcharge applicable to SBI and HDFC Bank will be 0.60 per cent and 0.20 per cent respectively," it added.

What are domestic systemically important banks?

In 2014, the RBI issued the framework for dealing with domestic systemically important banks that required the central bank to disclose the names of banks designated as such starting from 2015, and place them in appropriate buckets depending upon their systemic importance scores (SISs).

As part of the framework, an additional common equity requirement applies to each D-SIB depending on its positioning in the bucket. Foreign banks having a branch presence in India and being systemically important globally have to maintain additional CET1 capital surcharge proportionate to their risk weighted assets (RWAs) in the country.

Meanwhile, the health of the country's financial system is steadily improving and commercial banks' asset quality is expected to improve further over the next 12 months from a decadal high, the RBI wrote in the 28th edition of its Financial Stability Report (FSR), also released on Thursday.

Banks' gross non-performing asset (GNPA) ratio continued to improve in the second quarter of the current financial year, easing to 3.2 per cent at the end of September, it said.

In his foreword to the FSR, RBI Governor Shaktikanta Das wrote that achieving durable price stability, ensuring medium-term debt sustainability, further strengthening financial sector resilience, creating new growth opportunities, and promoting inclusive and green growth continued to be key policy priorities.

He also said that the RBI remains committed to acting early and decisively to prevent any build-up of risks.

India is one of the fastest growing major economies in the world with a rising potential growth profile, the RBI chief added.

Last month, the RBI tightened norms for personal loans and credit cards, raising the risk of slowing loan growth. The tighter rules—in the form of higher capital requirements—will make such loans costlier and likely curb growth in these categories, which have outpaced the overall bank credit growth of about 15 per cent over the past year.

The RBI increased the risk weights for banks and non-bank financial companies (NBFCs)—or the capital that banks need to set aside for every loan—by 25 percentage points to 125 per cent on retail loans.

With inputs from agencies

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