What are Domestic Systemically Important Banks?

Domestic Systemically Important Banks (DSIBs) are banks that are critical to the country's economy due to their size, complexity, and interconnectivity.

Which banks are deemed Domestic Systemically Important in India?

State Bank of India, ICICI Bank, and HDFC Bank are identified as DSIBs in India.

What criteria are used to determine DSIBs in India?

Criteria include bank size, complexity, lack of substitutes, and interconnectedness.

When did RBI start implementing the DSIB framework?

The Reserve Bank of India started the DSIB framework in 2014.

Why are DSIBs important for the economy?

DSIBs are crucial because their failure can significantly impact the country's financial stability.

What is the additional common equity requirement for DSIBs?

DSIBs require 0.20% to 0.80% additional common equity as a capital buffer.

What regulatory measures are taken for DSIBs?

Tighter regulatory oversight and additional capital requirements are imposed on DSIBs to mitigate risks.

‘Domestic Systemically Important Banks (D-SIBs)’- To The Point | Drishti IAS

00:05:32

https://www.youtube.com/watch?v=6wXBfxzYd6U

Summary

TLDRThe video discusses the concept and importance of Domestic Systemically Important Banks (DSIBs) in India. These banks are key to the economy due to their size, operational complexity, and interconnections. The Reserve Bank of India (RBI) has classified the State Bank of India, ICICI Bank, and HDFC Bank as DSIBs, using criteria like the bank’s size, complexity, and the lack of substitution. DSIBs must hold additional common equity as a buffer ranging from 0.20% to 0.80% to manage potential risks. The DSIB framework, initiated by RBI in 2014, ensures that these banks can manage systemic risks effectively, given their significance to India's financial stability. No new banks entered the DSIB list during the latest review after March 31, 2019.

Takeaways

🏦 State Bank of India, ICICI Bank, and HDFC Bank are DSIBs in India.
📊 DSIBs are vital due to their large market presence and complex operations.
🔍 The RBI started this classification in 2014 with a systematic approach.
🏛️ DSIBs must reserve additional equity ranging from 0.20% to 0.80%.
🔗 These banks are crucial due to their high interconnectedness in the economy.
📉 Failure of a DSIB could severely impact financial stability.
📋 Criteria for DSIBs include size, complexity, and lack of substitution.
🔐 Stronger regulations and oversight are applied to DSIBs.
🗓️ The latest review shows no new banks qualified as DSIBs beyond 2019.
💡 Managing systemic risk is key to DSIB operations.

Timeline

00:00:00 - 00:05:32
The video mentions the availability of daily state-specific current affairs on the 'Dristi PCS' channel every evening at 6 PM and directs viewers to the 'Drishti IAS English YouTube Channel' for English versions. The video then introduces a segment on 'Domestic Systemically Important Banks (D-SIBs)' and explains these banks' significance in the domestic economy due to their size, complexity, irreplaceability, and interconnectedness. The criteria used for determining these banks, which include total assets more than 2% of GDP, were introduced by India's RBI in 2014. Additionally, the assessment of banks includes evaluating their systematic importance and complexities. The video continues with a discussion of a framework established in 2012 for supervising banking activities, which was finalized by the Reserve Bank of India after consulting with other authorities in 2011. Some additional facts are shared regarding the management of any financial risks through common equity shares.

Mind Map

Faqs

What are Domestic Systemically Important Banks?
Domestic Systemically Important Banks (DSIBs) are banks that are critical to the country's economy due to their size, complexity, and interconnectivity.
Which banks are deemed Domestic Systemically Important in India?
State Bank of India, ICICI Bank, and HDFC Bank are identified as DSIBs in India.
What criteria are used to determine DSIBs in India?
Criteria include bank size, complexity, lack of substitutes, and interconnectedness.
When did RBI start implementing the DSIB framework?
The Reserve Bank of India started the DSIB framework in 2014.
Why are DSIBs important for the economy?
DSIBs are crucial because their failure can significantly impact the country's financial stability.
What is the additional common equity requirement for DSIBs?
DSIBs require 0.20% to 0.80% additional common equity as a capital buffer.
What regulatory measures are taken for DSIBs?
Tighter regulatory oversight and additional capital requirements are imposed on DSIBs to mitigate risks.