Domestic Systemically Important Bank (D-SIB) is a cornerstone topic for advanced banking aspirants. In this guide, we cover the 15 most important questions. This Vital mock test is specifically designed for Bank Promotion Exams Scale II – V, RBI Exams, SBI PO, and IBPS PO to help you master the concepts quickly.
Why This Domestic Systemically Important Bank (D-SIB) Test Matters?
Exam Weightage: For RBI Grade B, this topic is critical for Phase 2 Finance & Management. For Bank Promotion (Scale II-V), questions on D-SIB capital surcharges are a staple in the Circulars section.
Difficulty: Moderate to Hard (Regulatory Guidelines).
Recommended: Read Liquidity Coverage Ratio (LCR) – 12 Most Expected Questions.
Practice Domestic Systemically Important Bank (D-SIB) (Live Mock Test)
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Domestic Systemically Important Bank (D-SIB) – 15 Most Expected Questions
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In the context of the Indian banking system, what does the designation Domestic Systemically Important Bank (D-SIB) primarily signify?
Explanation
Correct: B
D-SIBs are perceived as “Too Big to Fail.” This perception creates an expectation of government support during distress, which necessitates higher capital requirements and stricter supervision to offset the systemic risk they pose. This defines the core concept of a Domestic Systemically Important Bank (D-SIB).
D-SIBs are perceived as “Too Big to Fail.” This perception creates an expectation of government support during distress, which necessitates higher capital requirements and stricter supervision to offset the systemic risk they pose. This defines the core concept of a Domestic Systemically Important Bank (D-SIB).
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According to the Reserve Bank of India (RBI) framework, at what frequency is the list of Domestic Systemically Important Banks (D-SIBs) reviewed and updated?
Explanation
Correct: C
The RBI is required to disclose the names of the banks designated as D-SIBs every year, typically using data as of March 31st of that year. Regular updates ensure the list of Domestic Systemically Important Bank (D-SIB) entities remains current.
The RBI is required to disclose the names of the banks designated as D-SIBs every year, typically using data as of March 31st of that year. Regular updates ensure the list of Domestic Systemically Important Bank (D-SIB) entities remains current.
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Which of the following indicators are used by the Reserve Bank of India to determine the systemic importance of a bank for D-SIB designation?
1. Size (Assets)2. Interconnectedness
3. Substitutability
4. Complexity
1. Size (Assets)2. Interconnectedness
3. Substitutability
4. Complexity
Explanation
Correct: D
The assessment methodology uses four main indicators: Size, Interconnectedness, Substitutability, and Complexity. Each category has specific sub-indicators to calculate a composite systemic importance score. This methodology is central to the RBI D-SIB Framework for identifying every Domestic Systemically Important Bank (D-SIB).
The assessment methodology uses four main indicators: Size, Interconnectedness, Substitutability, and Complexity. Each category has specific sub-indicators to calculate a composite systemic importance score. This methodology is central to the RBI D-SIB Framework for identifying every Domestic Systemically Important Bank (D-SIB).
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Under the RBI’s assessment methodology for D-SIBs, which of the following is NOT a sub-indicator used to measure the ‘Interconnectedness’ of a bank?
Explanation
Correct: D
Interconnectedness measures how much a bank’s distress can spread to other institutions. Sub-indicators include intra-financial system assets, liabilities, and securities issued. The number of rural branches is a measure of outreach, not the systemic interconnectedness of a Domestic Systemically Important Bank (D-SIB).
Interconnectedness measures how much a bank’s distress can spread to other institutions. Sub-indicators include intra-financial system assets, liabilities, and securities issued. The number of rural branches is a measure of outreach, not the systemic interconnectedness of a Domestic Systemically Important Bank (D-SIB).
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If a foreign bank operating as a branch in India is designated as a Global Systemically Important Bank (G-SIB) by its home regulator, how is its additional Common Equity Tier 1 (CET1) capital surcharge in India determined?
Explanation
Correct: C
Foreign G-SIBs must maintain additional CET1 capital in India. This is calculated based on the G-SIB surcharge prescribed by their home regulator, applied to their Indian operations’ Risk Weighted Assets (RWAs), ensuring parity with the Domestic Systemically Important Bank (D-SIB) rules.
Foreign G-SIBs must maintain additional CET1 capital in India. This is calculated based on the G-SIB surcharge prescribed by their home regulator, applied to their Indian operations’ Risk Weighted Assets (RWAs), ensuring parity with the Domestic Systemically Important Bank (D-SIB) rules.
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For the purpose of D-SIB identification, the RBI focuses the assessment on a sample of banks. Which banks are automatically included in this assessment sample?
Explanation
Correct: B
The RBI selects a sample of banks for assessment based on their size. Banks with assets exceeding 2% of GDP are always included in the sample to calculate systemic scores. This threshold acts as a preliminary Systemic Risk Buffer check before declaring a Domestic Systemically Important Bank (D-SIB).
The RBI selects a sample of banks for assessment based on their size. Banks with assets exceeding 2% of GDP are always included in the sample to calculate systemic scores. This threshold acts as a preliminary Systemic Risk Buffer check before declaring a Domestic Systemically Important Bank (D-SIB).
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Consider the following statements:
Assertion (A):
Designated D-SIBs are subjected to higher levels of supervisory oversight compared to other commercial banks.Reason (R):
The failure of a D-SIB can have a cascading effect on the financial system, potentially leading to a collapse of real economic activity.
Explanation
Correct: A
Because D-SIBs are systemically critical, the regulator imposes stricter supervisory reviews and higher capital buffers to reduce the probability of failure. This heightened scrutiny is a hallmark of being a Domestic Systemically Important Bank (D-SIB).
Because D-SIBs are systemically critical, the regulator imposes stricter supervisory reviews and higher capital buffers to reduce the probability of failure. This heightened scrutiny is a hallmark of being a Domestic Systemically Important Bank (D-SIB).
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Based on the Reserve Bank of India’s 2025 assessment of D-SIBs, which of the following represents the correct bucket assignment and associated CET1 surcharge for the designated banks?
1. State Bank of India (SBI) — Bucket 4 (0.80%)2. HDFC Bank — Bucket 2 (0.40%)3. ICICI Bank — Bucket 1 (0.20%)
1. State Bank of India (SBI) — Bucket 4 (0.80%)2. HDFC Bank — Bucket 2 (0.40%)3. ICICI Bank — Bucket 1 (0.20%)
Explanation
Correct: D
As per the current bucketing, SBI is in Bucket 4, HDFC Bank in Bucket 2, and ICICI Bank in Bucket 1. These assignments reflect their relative systemic importance scores after recent updates to the Domestic Systemically Important Bank (D-SIB) list.
As per the current bucketing, SBI is in Bucket 4, HDFC Bank in Bucket 2, and ICICI Bank in Bucket 1. These assignments reflect their relative systemic importance scores after recent updates to the Domestic Systemically Important Bank (D-SIB) list.
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In the 5-bucket structure of the RBI’s D-SIB framework, what is the primary purpose of Bucket 5, which carries a
1.00% surcharge but currently remains “empty”?
1.00% surcharge but currently remains “empty”?
Explanation
Correct: B
Bucket 5 is designed to discourage banks from increasing their systemic footprint. If a bank in Bucket 4 grows further, it would move into Bucket 5, doubling the surcharge from lower buckets and incentivizing the management of systemic risk. This prevents Too Big To Fail Banks from growing unchecked within the Domestic Systemically Important Bank (D-SIB) regime.
Bucket 5 is designed to discourage banks from increasing their systemic footprint. If a bank in Bucket 4 grows further, it would move into Bucket 5, doubling the surcharge from lower buckets and incentivizing the management of systemic risk. This prevents Too Big To Fail Banks from growing unchecked within the Domestic Systemically Important Bank (D-SIB) regime.
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Under the D-SIB framework, the systemic importance score is a composite score. The “Size” indicator, which measures the bank’s total assets, carries a weightage of __ percent in the final score.
Explanation
Correct: C
The RBI’s methodology assigns 40% weightage to Size, while the other three indicators (Interconnectedness, Substitutability, and Complexity) each carry a weightage of 20%. This weighting is standard for assessing any Domestic Systemically Important Bank (D-SIB).
The RBI’s methodology assigns 40% weightage to Size, while the other three indicators (Interconnectedness, Substitutability, and Complexity) each carry a weightage of 20%. This weighting is standard for assessing any Domestic Systemically Important Bank (D-SIB).
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Consider the following statements regarding the “Too Big to Fail” (TBTF) tag:
Assertion (A):
D-SIBs often enjoy a competitive advantage in funding markets.Reason (R):
Market participants perceive an implicit government guarantee that these banks will be bailed out in the event of distress.
Explanation
Correct: A
The systemic importance of D-SIBs leads to a perception of implicit backing, which reduces the risk premium creditors require, allowing these banks to borrow at lower costs. This is a common economic side-effect of being a Domestic Systemically Important Bank (D-SIB).
The systemic importance of D-SIBs leads to a perception of implicit backing, which reduces the risk premium creditors require, allowing these banks to borrow at lower costs. This is a common economic side-effect of being a Domestic Systemically Important Bank (D-SIB).
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Which specific indicator is present in the G-SIB (Global) framework by the BCBS but is considered a sub-indicator within the RBI’s D-SIB (Domestic) framework?
Explanation
Correct: B
The G-SIB framework uses five primary indicators including Cross-jurisdictional activity. The RBI’s domestic framework focuses on four, treating cross-border activity as a sub-component of size and complexity. This distinction is key when calculating the CET1 Capital Surcharge for a Domestic Systemically Important Bank (D-SIB).
The G-SIB framework uses five primary indicators including Cross-jurisdictional activity. The RBI’s domestic framework focuses on four, treating cross-border activity as a sub-component of size and complexity. This distinction is key when calculating the CET1 Capital Surcharge for a Domestic Systemically Important Bank (D-SIB).
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In the “stacking order” of capital buffers under Basel III as implemented by the RBI, how is the D-SIB surcharge applied?
Explanation
Correct: B
D-SIB surcharges are additive. A bank must meet the minimum CET1 (5.5%), plus the CCB (2.5%), plus the specific D-SIB surcharge associated with its bucket. This layering ensures the robustness of every Domestic Systemically Important Bank (D-SIB).
D-SIB surcharges are additive. A bank must meet the minimum CET1 (5.5%), plus the CCB (2.5%), plus the specific D-SIB surcharge associated with its bucket. This layering ensures the robustness of every Domestic Systemically Important Bank (D-SIB).
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Regarding the liquidity requirements for D-SIBs, which of the following statements is correct?
Explanation
Correct: B
While the RBI monitors D-SIBs more closely due to their systemic risk, the D-SIB framework itself mandates additional capital (CET1), not a higher statutory minimum LCR or NSFR percentage. Liquidity rules are generally uniform even for a Domestic Systemically Important Bank (D-SIB).
While the RBI monitors D-SIBs more closely due to their systemic risk, the D-SIB framework itself mandates additional capital (CET1), not a higher statutory minimum LCR or NSFR percentage. Liquidity rules are generally uniform even for a Domestic Systemically Important Bank (D-SIB).
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What is the transition rule for a D-SIB whose Systemic Importance Score (SIS) falls below the threshold for its current bucket?
Explanation
Correct: B
To ensure stability in capital planning and avoid volatility, the RBI requires a bank’s score to stay in a lower range for two consecutive years before permitting a downward bucket shift. This prevents frequent reclassification of a Domestic Systemically Important Bank (D-SIB).
To ensure stability in capital planning and avoid volatility, the RBI requires a bank’s score to stay in a lower range for two consecutive years before permitting a downward bucket shift. This prevents frequent reclassification of a Domestic Systemically Important Bank (D-SIB).
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⚡ Quick Revision: Key Facts for Domestic Systemically Important Bank (D-SIB)
Bucket Surcharges: The additional Common Equity Tier 1 (CET1) requirement ranges from 0.20% to 1.00% depending on the bucket placement.
Assessment Cutoff: Banks with assets exceeding 2% of GDP are automatically sampled for D-SIB assessment.
Weightage Split: The ‘Size’ indicator holds 40% weightage, while Interconnectedness, Substitutability, and Complexity hold 20% each.
External Reference: Check official data on [EXTERNAL_LINK]Government Domestic Systemically Important Bank (D-SIB) Portal[/EXTERNAL_LINK].
❓ Frequently Asked Questions
Why is Domestic Systemically Important Bank (D-SIB) critical for Bank Promotion Exams Scale II – V?
It is a high-scoring area. Mastering Domestic Systemically Important Bank (D-SIB) ensures better performance in the objective papers of Bank Promotion Exams Scale II – V.
Does this test cover the full syllabus?
Yes, these Domestic Systemically Important Bank (D-SIB) questions cover the info released by the RBI.
Which banks are currently D-SIBs in India?
As of the latest RBI update, SBI, HDFC Bank, and ICICI Bank are the designated D-SIBs.