Module: | MODULE B: RISK MANAGEMENT
Q327: Calculate the absolute minimum Common Equity Tier 1 (CET1) ratio required to be maintained by the State Bank of India (SBI) for the financial year 2025-2026, considering the baseline CET1 minimum, the Capital Conservation Buffer, and its specific D-SIB surcharge based on the December 2025 RBI update.
✅ Correct Answer: C
The correct answer is C (8.80%). To calculate the total Common Equity Tier 1 (CET1) capital requirement for the State Bank of India (SBI), you must aggregate three distinct regulatory components.
First, the baseline minimum CET1 ratio mandated for all Indian banks is 5.5%. Second, banks must maintain a 2.5% Capital Conservation Buffer (CCB), which must be met exclusively with CET1 capital.
This brings the base requirement to 8.0% (5.5% + 2.5%). Third, per the RBI's annual Domestic Systemically Important Bank (D-SIB) review updated on December 2, 2025, SBI is retained in Bucket 4. The regulatory penalty for Bucket 4 is an additional CET1 surcharge of 0.80%. Therefore, the final calculation is 8.0% + 0.80% = 8.80%. Option A represents the base without the D-SIB surcharge.
Option B incorrectly applies the Bucket 2 surcharge.
Option D is mathematically incorrect.
First, the baseline minimum CET1 ratio mandated for all Indian banks is 5.5%. Second, banks must maintain a 2.5% Capital Conservation Buffer (CCB), which must be met exclusively with CET1 capital.
This brings the base requirement to 8.0% (5.5% + 2.5%). Third, per the RBI's annual Domestic Systemically Important Bank (D-SIB) review updated on December 2, 2025, SBI is retained in Bucket 4. The regulatory penalty for Bucket 4 is an additional CET1 surcharge of 0.80%. Therefore, the final calculation is 8.0% + 0.80% = 8.80%. Option A represents the base without the D-SIB surcharge.
Option B incorrectly applies the Bucket 2 surcharge.
Option D is mathematically incorrect.