The Reserve Bank of India (RBI) recently included Airtel Payment Bank in the second schedule of RBI Act, 1934. And HDFC, ICICI and SBI are to remain as D – SIB. D – SIB is Domestic Systematically Important Banks.
Criteria for a D – SIB
The bank should belong to the category of CET 1. CET 1 is Common Equity Tier 1. It is a precautionary to self-protect from financial crisis. This comes under the BASEL III norms. The BASEL III norms are international rules. It was introduced to improve supervision and regulation. It is divided into Tier I and Tier II. The Tier I is divided into CET 1 and AT1. AT 1 is Additional Tier 1. In CET 1, the performance of the bank is evaluated based on its return. The CET 1 is the ratio between bank’s capital and assets.
Banks in D – SIB list
The RBI placed ICICI and SBI as D – SIB in 2015-16. HDFC was placed in the list in 2017.
Second Schedule of RBI
The RBI Act, 1934 has four schedules. A bank has to fulfil the following conditions to enter into the second schedule of RBI:
- DTL should not be less than 750 crores continuously for a year
- CRAR should be 12% at least
- Gross NPA should be less than 5%
- Should comply with SLR and CRR
- No major supervisory concerns
Terms used in the article
- DTL: It is the amount collected through deposits. DTL stands for Demand and Time Liabilities
- CRAR: Capital to Risk Weighted Assets Ratio. It is used to protect the depositors.
- NPA: Non Performing Assets
- SLR: Statutory Liquidity Ratio. It is the minimum amount a bank has to maintain in the form of cash or other securities or gold.
- CRR: Cash Reserve Ratio. It is the share of total deposit that is mandated to RBI. It is fixed by the monetary policy committee of RBI