RBI includes HDFC Bank in 'too big to fail' list

RBI includes HDFC Bank in 'too big to fail' list”

RBI today included HDFC Bank in the list of "too big to fail" lenders, referred to as D-SIB or domestic systemically important bank.

RBI categorises such banks as Domestic Systemically Important Banks (D-SIBs). HDFC Bank, the second-biggest Indian lender by assets, joins top lender SBI and ICICI Bank in the list referred to as D-SIB or domestic systemically important bank. The other banks on the list are the two largest lenders - State Bank of India (SBI) and ICICI Bank. RBI, in its framework for dealing with D-SIBs, describes them as "banks [that] assume systemic importance due to their size, cross-jurisdictional activities, complexity, lack of substitutability and interconnectedness".

DSIB banks are required to set aside additional common equity capital in a phased manner.

How does RBI define "too big to fail" banks?

Banks which act as biggest lenders, take part in all types of financial activities like home loans, auto loans, educational loans, etc. which brings development in both people's life and nation are considered as D-SIB.

Based on the methodology provided in the D-SIB framework and data collected from banks as on 31 March 2015 and 31 March 2016, respectively, the Reserve Bank had announced State Bank of India and ICICI Bank D-SIBs on 31 August 2015 and 25 August 2016, respectively. "The disorderly failure of these banks has the potential to cause significant disruption to the essential services they provide to the banking system, and in turn, to the overall economic activity", the RBI stated. As such large banks have the potential to disrupt the banking system, government intervention was considered necessary to ensure financial stability. The banking regulator prescribes higher capital requirements - in terms of additional Common Equity Tier 1 (CET 1) capital - for such entities.

The RBI says that SIBs are perceived as banks that are "Too Big To Fail" (TBTF). These banks are subject to more rigorous regulation and capital requirement. The perception alo helps these banks in the funding markets and bring advantage for them.

Apart from protection from the RBI in the times of distress, the D-SIBs will be subjected to higher levels of supervision so as to prevent disruption of financial services in the event of any failure. However, the RBI notes, perceived expectation of government support amplifies risk-taking, reduces market discipline, creates competitive distortions, and increases the probability of distress in the future.

Like this


05 September 2017
Mark Hamill Wanted Luke Skywalker's Evil Twin in The Last Jedi
Before Daniels exited the stage, he spoke a bit about his experience filming the upcoming The Last Jedi . Thanks to the Empire's coverage of The Last Jedi , we know what this ship will look like.

05 September 2017
Man claims cold medicine caused fatal stabbing of wife
He realized his dream was all too real when he found her stabbed to death on the ground, ABC News writes. "So, I took some". Phelps is being held at Wake County Detention Center without bail and faces his first hearing on Tuesday.

05 September 2017
Kolkata: State govt. run auditorium cancels RSS chief Mohan Bhagwat's event
In January, Kolkata Police had denied permission for Bhagwat's rally but the Calcutta High Court had overruled the decision. Meanwhile, the Kolkata police said that the reason for denial was 10-day early reservation during Puja holidays.

05 September 2017
OPP officer struck, dragged by vehicle with Quebec license plate
Members of the collision reconstruction unit and forensic identification unit were on scene conducting an investigation. Update: The suspect vehicle has been located by Peel Regional police in the area of Trailwood Dr & Hurontario St.

05 September 2017
Trento, bambina di 4 anni uccisa dalla malaria: primo caso in Italia
Nel frattempo l'Apss ha disposto in via precauzionale la disinfestazione del reparto di Pediatria dell'Ospedale S. In Italia la malaria è stata debellata negli anni '50 con una grossa operazione di decontaminazione delle paludi.

05 September 2017
Grey's Anatomy season 14 spoilers: Don't expect more Leah Murphy
Since her arrival in season 9, Leah Murphy has not only become friends and she quickly became a controversial character ... But even though the character returned to happy viewers, her presence apparently wasn't deemed necessary to stick around.

05 September 2017
Nepal pays tributes to Radhakrishnan on Teachers Day
When the same question was asked to another student, Pari, who studies in class VII was unable to remember her first teacher . Since we believe that teachers are the third parent and that's why we tend to celebrate this day with harsh and velocity.

05 September 2017
Man Dies After Passing Through Ceremonial "Burning Man" Pyre
CNN reported that "fire personnel attempted to pull him out but falling portions of the burning structure hindered their efforts". Some of the resources for festival goers and staff include emotional support teams and peer counseling, according to organizers.

05 September 2017
Opposition lines up Tiruchy rally against NEET in Tamil Nadu
The Central Government kept Tamil Nadu Government's ordinance exempting government colleges from NEET on hold for a year. She committed suicide in her home a week after Centre announced that Tamil Nadu can not be exempted from NEET.

05 September 2017
Israel launched a large-scale military exercises
Zionist entity holds on Tuesday largest military drills in nearly 20 years along Lebanon border that simulate a Hezbollah attack. The last time the Israeli army held a drill of this extent was in 1998, when it simulated a war with the Syrian army for a week.