Question

Q. With regard to the “Domestic Systemically Important Banks” (D-SIBs) in India’s banking sector, consider the following statements.

Which of the above given statements are correct?

• A.
  1 and 2 only
• B.
  2 only
• C.
  1 and 3 only
• D.
  1, 2 and 3

Answer 1

The correct option is A

1 and 2 only
Explanation:

Statement 1 is correct: Domestic Systemically Important Banks (D-SIBs) refers to those banks that are too big to fail. Due to their size, cross-jurisdictional activities, complexity and lack of substitute and interconnection, some banks become systemically important and if such banks fail, there would be significant disruption to the essential services they provide to the banking system and the overall economy.

Statement 2 is correct: This tag of too-big-to-fail also indicates that in case of distress, the government is expected to support these banks.

Statement 3 is incorrect: Both public and private sector banks (whose assets exceed $2\%$ of GDP) can be classified by the Reserve Bank of India as D-SIBs. At present, State Bank of India, ICICI, and HDFC Banks are recognized as D-SIBs.