Domestic Systemically Important Bank

  • D-SIB means that the bank is too big to fail.
  • According to the RBI, some banks become systemically important due to their size, cross-jurisdictional activities, complexity and lack of substitute and interconnection.
  • Banks whose assets exceed 2% of GDP are considered part of this group.
  • The RBI stated that if such a bank fails, there would be significant disruption to the essential services they provide to the banking system and the overall economy.
  • The too-big-to-fail tag also indicates that in case of distress, the government is expected to support these banks.
  • Due to this perception, these banks enjoy certain advantages in funding.
  • It also means that these banks have a different set of policy measures regarding systemic risks and moral hazard issues.
  • There are now three ‘too big to fail’ financial entities, SBI, ICICI and HDFC in the country.
  • The concept of D-SIB emerged after the global financial crisis.

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