MUMBAI: The Reserve Bank has retained State Bank of India, HDFC Bank and ICICI Bank—the nation’s largest three lenders—in the 2025 list of domestic systemically important banks (D-SIBs) or too-big-to-fail-lenders--- a classification that demands core higher capital allocation in according with their risk-weighted assets.
While SBI has been in the list since 2015, State Bank of India, the Reserve Bank added ICICI Bank to the list in 2016 and HDFC Bank in 2017. The current update is based on the data collected from banks as of March 31, 2025, the central bank said Tuesday. The classification will demand from these banks of additional capital requirement under which these banks must maintain an additional common equity tier 1 (CET1) capital alongside the capital conservation buffer.
Placed in the highest bucket of 4, SBI will need to make an additional CET1 requirement of 0.80 percent of its risk-weighted assets (RWAs), which is as same as last year. When the bank is moved to the bucket5, it will have to make 1 percent addition CET1 capital. HDFC Bank, which is the second largest lender in the country, is in bucket 2 (there is no one in bucket 3 where the additional capital requirement would be 0.60%), with an additional CET1 requirement of 0.40 percent -- which is also as same last year.
ICICI Bank, the third largest bank, is in bucket 1, with an additional CET1 requirement of 0.20 percent --which is also as same last year. The central bank said the additional CET1 requirement for these too-big-to-fail-banks will be in addition to the capital conservation buffer as mandated under the Basel III norms.
The Reserve Bank had issued the ‘framework for dealing with domestic systemically important banks on July 22, 2014, which was subsequently updated on December 28, 2023. The D-SIB framework requires the Reserve Bank to disclose the names of banks designated D-SIBs starting from 2015 and place these banks in appropriate buckets depending on their systemic importance scores.
Based on the bucket in which a D-SIB is placed, an additional CET1 requirement has to be applied to it. In case a foreign bank having branch presence in the country is a global systemically important bank (G-SIB), it has to maintain additional CET1 capital surcharge in India as applicable to it as a G-SIB, proportionate to its risk weighted assets here--additional CET1 buffer prescribed by the regulator (amount) multiplied by India RWA as reported in the consolidated global group books divided by total consolidated global group RWA.
However, no foreign lender has so far been classified as one, as barring Stanchart and HSBC no other overseas bank has retail banking presence in the country now. These two British lenders also have very minimal presence only having curtailed their branch banking. Only DBS Bank of Singapore has a robust branch banking but that is under the wholly owned subsidiary route and not as branch route. The British lenders are still following the branch banking licence.