RBI on Banking System: Last year, the economy was badly affected due to the Corona epidemic and lockdown spread across the country.
This also had its full impact on the banking sector, where the financial condition of many banks worsened. In such a situation, customers have lost their trust in many banks, but now the Reserve Bank of India has given a big statement about SBI, ICICI and HDFC. According to the RBI, there are three large banking institutions and they can never drown.
List of D-SIB 2020 released
The RBI on Tuesday announced the 2020 list of D-SIB (Domestic Systemically Important Banks). According to RBI, the names of State Bank of India, ICICI and HDFC are among the major lender banks, which, despite adversity, continue to be systematically important domestic banks in 2020. In addition SIBs are subjected to high levels of supervision so as to prevent disruption of financial services in the event of any failure.
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RBI further stated that SBI, ICICI and HDFC Bank are being systematically recognized as important domestic banks (D-SIBs). Additional Common Equity Tier 1 (CET1) requirement for D-SIB was phased out from April 1, 2016 and became fully effective from April 1, 2019. In the case of SBI, the additional CET1 requirement as a percentage of risk weighted assets (RWA) is 0.6 percent, while for the other two banks it is 0.2 percent.
SIB monitors financial crisis
According to the central bank, if the foreign bank’s branch in India is a global systemically important bank (G-SIB), it will have to maintain an additional CET1 capital surcharge in the country, in proportion to its RWA. SIB helps banks during the financial crisis through the government. These banks also take advantage of certain advantages in the funding market.
