State Bank, ICICI Named India’s ‘Too Big to Fail’ Banks

State Bank of India and ICICI Bank Ltd. are “systemically important banks” in India that must hold additional capital to limit risks to financial stability, the nation’s central bank said today.

ICICI must hold 0.2 percentage point more capital than the rest, and State Bank must hold 0.6 percentage point more, the Reserve Bank of India said in a statement on its website. The selected banks have until April 2019 to meet these additional capital requirements on their risk-weighted assets that will be applicable in a phased manner starting April 1, 2016.

The central bank will decide annually which banks qualify as systemically important and the list will be disclosed in August every year, it said. Lenders can fall into one of four categories, depending on their importance and need for extra provisions.

“Tighter rules for these ‘Too Big to Fail’ banks could be a drag on capital in the short term,” Karthikeyan P, a Chennai-based banking analyst at Cholamandalam Securities Ltd., said by phone. “But they will be able to command better valuations, credit profiles and investor confidence in the longer term.”

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