Asian stock indices are lower today as Chinese and Hong Kong shares fall. The Shanghai Composite is off 0.06%, while the Hang Seng is down 0.19%. The Nikkei 225 is trading lower by 0.47%. US markets were shut overnight on account of Labor Day.
Back home, share markets in India have opened the day on a flat note with positive bias. The BSE Sensex is trading higher by 25 points while the NSE Nifty is trading higher by 13 points. The BSE Mid Cap and BSE Small Cap index both opened the day up by 0.5%.
All sectoral indices have opened the day in green with stocks from energy sector and realty sector leading the gainers. The rupee is trading at 64.05 to the US$.
Bank stocks opened the day on a mixed note with DCB Bank and South Indian Bank witnessing maximum buying interest. HDFC Bank share price opened the day on an optimistic note after the Reserve Bank of India has added HDFC Bank in the list of Domestic Systemically Important Banks (D-SIBs).
Since 2015, the central bank has been identifying banks whose failure would impact the whole financial system. These banks are subject to more rigorous regulation and capital requirement. State Bank of India and ICICI Bank were identified as DSIBs under the RBI rules in 2015.
HDFC Bank’s inclusion in this category means that the bank would need to adhere to higher capital requirements. The positive side of being recognised as a systemically important bank is that investors would feel more secure in parking bulk funds in these institutions as they are too big to fail.
Based on the bucket in which a D-SIB is placed, an additional common equity requirement has to be applied to it. HDFC Bank falls in bucket 1 and an additional CET-1 requirement of 0.15% will be applicable for it from 1 April 2018.
SIBs are seen as ‘too big to fail‘, creating an expectation of government support for them in times of financial distress. These banks also enjoy certain advantages in funding markets.
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