The Reserve Bank of India included HDFC in the list of banks deemed “too big to fail”. The other banks in this list are State Bank of India and ICICI Bank. Banks with assets that surpass 2% of the annual gross domestic product are categorised as this.
“In addition to the SBI and ICICI Bank, which continue to be identified as Domestic Systemically Important Banks [D-SIBs], the RBI has also identified HDFC Bank as a D-SIB, under the same bucketing structure as last year”, said RBI.
An examination of the banks’ size is used to gather a list of D-SIBs using a “systemic importance score”. The RBI has categorised HDFC and ICICI Bank under Bucket-1 of the D-SIB classification. The SBI is in Bucket-3 as the SBI is larger than HDFC or ICICI Bank. RBI first released a list of D-SIBs in 2015.
In the meantime, HDFC has outdone ICICI over the last two years in terms of balance sheet size and market capitalisation, reported BloombergQuint.
Banks categorised as D-SIB have to reserve an additional percentage of core capital, known as the D-SIB surcharge. For HDFC, this comes to 0.15% of core capital. It will be applicable from April 1, 2018.
