Smith and head coach Darren Lehmann will be under huge pressure to step down or be sacked. Cricket Australia has taken a strong line on player behaviour in the Big Bash to protect the reputation of its family friendly multi-million dollar tournament and will be facing pressure to show it has the stomach to take a tough line against its Test team. The position of Australia Test captain carries great prestige and is often described as the second most important job in the country behind being prime minister.
The match referee, Jeff Crowe, has charged Bancroft with trying to alter the conditions of the ball, but now must decide whether to take action against Smith as well.
What is ball tampering?
Ball tampering is actually quite a minor offence in the playing regulations. It only carriers a maximum one Test ban but it is the reputational damage for Smith and Australia that could have wider ramifications.
"We had a discussion during the break and on myself I took an opportunity to use some tape, get some granules from the rough patches on the wicket and try to change the ball condition," said Bancroft, who is playing in only his eighth Test. "It did not work. The umpires did not change the ball but once I was cited on the screens I panicked quite a lot and that resulted in me shoving it down my long trousers."
Law 42 in the International Cricket Council (ICC) code of conduct deals with ball-tampering as follows: "Players are barred, by Law 42.3, from rubbing the ball on the ground, interfering with its seam or surface, or using any implement that can alter the condition of the ball to thereby gain unfair advantage."
What did the Aussies say?
"I was in the wrong place at the wrong time," Bancroft said. "I was nervous about it. There are hundreds of cameras around."
When asked who was responsible, Smith said it was a decision made by the players and not the coaching staff.
"It was purely the players, and the leadership group (that were responsible)," Smith said.
"We saw this game as such an important game. We've seen the ball reversing ... so that's a big mistake on our part.
"I'm incredibly sorry for bringing the game into disrepute ... The boys in the shed are embarrassed. I feel for Cam as well. I am embarrassed to be sitting here."
Former Aussie leg-spinner Shane Warne was heavily critical of the footage of Bancroft's "undies-gate" controversy.
"I don't care who you are, you can't tamper with the ball," Warne said during the tea break.
"I don't care if it's Australia or South Africa. You can't do (that). It looked like what we all think it was. To me that'd be really disappointing. A lot of the Australian sides I've played in, there was never anything like that."
Warne said he "felt for" the Aussie star as the end of day's play loomed.
"I don't think he's taken it upon himself to put it in his pocket," he said. "Now, who has told him to do that? It's important to find out that. You've got to own up."
"In my opinion, he's tampered with the ball," Graeme Smith said after tea. "It's quite obvious. I really am amazed, with the footage, that the umpires have done nothing about it.
"If it is correct, there's some tough questions you've got to ask of Steve Smith and Darren Lehmann. They're the leaders and (Bancroft) is the one who has played seven or eight Test matches. It's obviously a decision taken behind the scenes."
CRISIS MEETINGS? SMITH LEAVES THE FIELD
Steve Smith conspicuously left the field in the final session of play after the ball tampering controversy erupted, leaving David Warner to briefly skipper the side for the evening.
Fans speculated the Aussie captain was in a crisis meeting with coach Darren Lehmann in anticipation for the storm after the day's play.
AUSSIES SLAMMED FOR HYPOCRISY
South African legend Mark Boucher led the chorus of critics in accusing Australia of double standards after coach Darren Lehmann blasted home crowds on the tour for their "disgraceful" personal abuse towards his players and their families.
Lehmann made the comments after a spectator taunted David Warner when the opener was making his way up the race after being dismissed on day two, causing the left-hander to stop and turn back to the man before security intervened.
Speaking after play, Lehmann said Cricket Australia had written to Cricket South Africa about the hateful insults being hurled towards the visiting camp.
"It's been disgraceful. You're talking about abuse of various players and their families and personal abuse," Lehmann said. "It shouldn't happen.
"Banter, that's fine. Banter is good-natured fun by crowds but they've gone too far here ... it's been poor.
"As soon as they cross the line and they talk about players' families the whole time and getting abused like that, it's just not on."
Boucher took to Twitter to accuse the Aussies of being hypocritical ā saying Australian crowds were guilty of "ridiculous" racism.
Boucher also retweeted another social media user who mocked Lehmann's double standards, referencing his remarks ahead of the 2013/14 Ashes when he encouraged Australian crowds to abuse English quick Stuart Broad for "blatant cheating".
Lehmann was referring to Broad refusing to walk and being given not out after he edged a ball to slip during the 2013 Ashes in England.
Boucher's former South African teammate Paul Harris was on the wicketkeeper's side, saying Australian crowds were just as bad.