The Reserve Bank of India (RBI) announced Monday the designation of State Bank of India (SBI) and ICICI Bank as Domestic Systemically Important Banks (D-SIBs).

The D-SIB framework requires the RBI to disclose the names of banks designated as D-SIBs every year in August starting from August 2015. The framework also requires that D-SIBs may be placed in four buckets depending upon their systemic importance scores (SISs). Based on the bucket in which a D-SIB is placed, an additional common equity requirement has to be applied to it.

The RBI had issued the framework for dealing with D-SIBs on July 22, 2014. The D-SIB framework specifies a two-step process of identification of D-SIBs. In the first step, the sample of banks to be assessed for systemic importance has to be decided. The selection of banks in the sample for computation of SIS is based on analysis of their size as a percentage of annual GDP.

The additional common equity tier 1 (CET1) requirements applicable to D-SIBs will be applicable from April 1, 2016 in a phased manner and would become fully effective from April 1, 2019. The additional CET1 requirement will be in addition to the capital conservation buffer.

Further, in case a foreign bank having branch presence in India is a global systemically important bank (G-SIB). The bank has to maintain additional CET1 capital surcharge in India as applicable to it as a G-SIB, proportionate to its Risk Weighted Assets (RWAs) in India.