RBI names SBI, ICICI as ‘too big to fail’ banks

The banks, as per the norms, will need to keep additional capital reserves. Higher capital requirements will be applicable from 1st Aril 2016 and will become effective within three years.

Reserve Bank of India (RBI) released its list of Domestic Systemically Important Banks on Monday. The list features names like State Bank of India (SBI) and ICICI Bank .

RBI had introduced the concept of D-SIBs after failure of number of large banks during the 2008 global financial crisis. D-SIBs include those banks, which are perceived as “too big to fail.” In 2013, RBI had said four to six banks will qualify D-SIB category, names of which will be released in August every year.

The banks, as per the norms, will need to keep additional capital reserves. Higher capital requirements will be applicable from 1st Aril 2016 and will become effective within three years.

Pratip Chaudhuri, former SBI Chairman told CNBC-TV18 that bringing SBI under D-SIB category will not impact the bank’s profit and loss margin in the near term.

SBI will have to raise additional common equity at 0.8 percent of risk weighed assets while ICICI will have to raise 0.2 percent.

The main challenge for the banks will be of raising the additional common equity, Ashvin Parekh, Managing Partner of Ashvin Parekh Advisory Services said.