Mains Guidance Program (MGP) for UPSC CSE 2026, Cohort-1 starts 28th January 2025. Registrations Open Click Here to know more and registration.
Why in News?
Reserve Bank of India(RBI) has retained SBI, ICICI and HDFC Bank in Domestic Systemically Important Banks (D-SIBs) list or banks that are considered as “Too Big To Fail”.
Facts:
- Domestic Systemically Important Banks(D-SIBs): D-SIBs are banks that are Too Big To Fail(TBTF). According to RBI, banks become D-SIBs due to their size, cross-jurisdictional activities, complexity and lack of substitute and interconnection. Banks, whose assets exceed 2% of GDP are considered part of this group.
- Significance of D-SIBs:
- Failure of such banks will result into significant disruption to the essential banking services to banking system and the overall economy.
- D-SIB tag also indicates that in case of distress, the government is expected to support these banks.
- They are also subjected to higher levels of supervision so as to prevent disruption in financial services in the event of any failure.
- D-SIB Framework: The Reserve Bank had issued the framework for dealing with D-SIBs in 2014. It requires the RBI to disclose the names of banks designated as D-SIBs starting from 2015. RBI places DSIBs in one of the 5 buckets based on their systemic importance scores(SISs).
- As part of this framework, these three banks have to maintain additional Common Equity Tier(CET) 1 compared to other commercial banks.
- CET 1: It is a component of Tier 1 capital that includes ordinary shares and retained earnings.
Article Source
Discover more from Free UPSC IAS Preparation Syllabus and Materials For Aspirants
Subscribe to get the latest posts sent to your email.