Draft RBI norms on large banks seek add'l capital buffer

Written By Unknown on Selasa, 03 Desember 2013 | 08.11

To protect the financial system from risks emanating from large banks, the RBI today floated draft guidelines for the domestic systemically important banks (D-SIBs) that would require such lenders to maintain an additional core capital of upto 0.80 per cent starting 2015.

According to the draft guidelines, a list of D-SIBs will be made public every August starting from 2015.

These D-SIBs will be selected based on a pre-determined formula and will be required to maintain higher core tier-I capital ranging from 0.20 to 0.80 per cent of their risk weighted assets, the draft RBI guidelines issued today said.

The classifying system is based on the BCBS (Basel Committee for Banking Supervision) framework for global systematically important banks (SIBs) and involves computation of composite systemic importance score for banks which will be arrived at post-considering a bank's size, interconnectedness, substitutability and complexity, the RBI said.

SBI has alone has more than 20 per cent market share in the Indian banking system. In the private sector, lenders, including  ICICI Bank and HDFC Bank , have significant influence.

"The Reserve Bank will determine a cut-off score beyond which banks will be considered D-SIBs. Based on their systemic importance scores, banks will be plotted into different buckets," RBI said.

The draft guidelines say in the eventuality of a financial crisis, issues faced by large financial institutions in an interconnected system harm the real economy and in some cases, the governments has to intervene to ensure financial stability.

"Costs of public sector intervention and consequential increase in moral hazard require that future regulatory policies should aim at reducing the probability of failure of systemically important banks and also should try to reduce the impact of the failure of these banks," it said.

It added that setting aside additional capital will also ensure a level-playing field between SIBs and non-SIBs. The RBI has invited comments on the draft guidelines till December 31.


HDFC Bank stock price

On December 02, 2013, HDFC Bank closed at Rs 661.05, down Rs 0.15, or 0.02 percent. The 52-week high of the share was Rs 727.00 and the 52-week low was Rs 528.00.


The company's trailing 12-month (TTM) EPS was at Rs 31.65 per share as per the quarter ended September 2013. The stock's price-to-earnings (P/E) ratio was 20.89. The latest book value of the company is Rs 151.32 per share. At current value, the price-to-book value of the company is 4.37.


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