This study examines the impact of the classification of Domestic Systematically Important banks (DSIBs) and their approach to deposits. Th e research was conducted within the Indian context using a dataset of Indian banks from 2006 to 2022, with a pretreatment period of 2006 - 2015 and a post- treatment period of 2020 - 2022. The main hypothesis centers on the plausibility of DSIBs increasing their demand deposits to compensate for the constraints induced by the additional capital requirements imposed on them. A difference-in-differences (DID) estimation was performed to assess the impact of the change in classification on the deposit structure. The Breusch- Pagan test was used to assess heteroskedasticity, and a cluster-robust standard errors-based DID method was adopted to account for heteroskedasticity in the data. DID assessment was performed after controlling for total assets, which was used as a proxy for bank size. The parallel trends assumption was tested using a parallel trend test, and robustness was further checked using a Granger causality test. We find that the volume of demand deposits increased after the classification of these banks as being systematically important banks. We also find evidence that, on a comparable scale, the change in interbank deposits for DSIBs is much greater than the change in retail deposits from other sources.
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