SBI, ICICI Bank ‘too big to fail’, says RBI

MUMBAI: The Reserve Bank of India on Monday listed India’s largest lender State Bank of India and ICICI Bank, the country’s largest private sector bank, as India’s two domestic systemically important banks (D-SIBs).

D-SIBs are equivalent to ‘too big to fail’ banks in other countries such as the US and will be subjected to higher intensity of supervision and also keep aside additional capital to cover risk.

The selection of banks is based on analysis of their size as a percentage of annual GDP.

“Based on systemic importance scores in ascending order, banks will be plotted into four different buckets and will be required to have additional common equity (tier 1) capital requirement ranging from 0.20% to 0.80% of risk-weighted assets,” according to the framework released by the RBI in 2014.

While SBI will need to set aside an additional tier 1 common equity of 0.6% of its risk-weighted assets, ICICI Bank will have to maintain an extra 0.2%. This will be applicable from April 1, 2016 in a phased manner and will be fully effective from April 1, 2019.

“SBI has a much higher level of tier I at 9.62% as opposed to 7.00% required under current norms. We will adhere to the additional requirements as and when they become applicable,” SBI chief Arundhati Bhattacharya said.

“The bank’s capital adequacy is well in excess of regulatory requirements,” ICICI Bank CEO and MD Chanda Kochhar said.