The SBI today welcomed the Reserve Bank of India’s move to identify domestic systemically important banks (D-SIBs) — large and highly interconnected financial institutions — whose failure can impact the functioning of the financial system and harm the economy.
According to P.K. Malhotra, Dy GM (Operations), SBI, the step is likely to make the financial world more secure.
“I welcome the step if that makes the financial world more secure,” he said adding that “it is a good thing that RBI is looking at such steps”. He was speaking to presspersons on the sidelines of Infocom.
The apex bank has released the draft framework, which outlines the methodology to be adopted for identifying the D-SIBs and regulatory policies for them. These banks are being called “too large to fail”. Such banks will have a higher capital requirement and regulatory oversight. Comments have been sought till December 31.
Banks classified as D-SIBs will be subjected to additional capital requirement in the range of 0.2 per cent to 1 per cent of their risk-weighted assets. The higher capital requirements will be applicable from April 2016 in a phased manner. And the process will be completed by April 2019.
The names of the banks classified as D-SIBs will be disclosed in August every year, starting from 2015.