RBI risk guardrails: SBI, HDFC and ICICI keep D-SIB tag; what do higher capital buffers mean for them?

India’s three largest lenders — State Bank of India, HDFC Bank and ICICI Bank — will continue to be treated as domestic systemically important banks (D-SIBs), the Reserve Bank said on Tuesday, underscoring their critical role in the financial system and the need for stronger capital cushions. The designation requires the lenders to maintain higher loss-absorption capacity, according to PTI.The RBI said the three banks must hold additional Common Equity Tier 1 (CET1) capital over and above the mandatory Capital Conservation Buffer, calculated as a percentage of risk-weighted assets (RWAs). SBI must maintain an extra 0.80% of RWAs, HDFC Bank 0.40%, and ICICI Bank 0.20%, the central bank said.The current classification follows the RBI’s Framework for dealing with Domestic Systemically Important Banks (D-SIBs) first introduced on July 22, 2014, and updated on December 28, 2023. Under the framework, the central bank publishes the list of D-SIBs each year and places them in buckets based on their Systemic Importance Scores (SIS).SBI and ICICI Bank were first identified as D-SIBs in 2015 and 2016, while HDFC Bank joined the list in 2017, alongside SBI and ICICI Bank, the RBI said in an official statement.