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Q9: 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"?
A
To reserve a spot for a potential new Public Sector Bank merger.
B
To act as a "safety valve" and disincentive, ensuring that if a D-SIB grows even more systemically important, it faces an immediate and significantly higher capital penalty.
C
To comply with international treaty requirements that mandate five buckets regardless of occupancy.
D
To provide a lower surcharge for banks that show significant improvement in risk management.
✅ Correct Answer: 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.
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