A fresh round of asset quality review (AQR) as suggested by the Economic Survey will have minimal impact on banks’ portfolios, senior bankers said, as lenders have disclosed and identified a majority of stressed accounts, unlike in 2015.


The last round of AQR, undertaken by the Reserve Bank of India (RBI), showed how different banks had unevenly classified loan exposures to the same borrower. The exercise held during the tenure of the then governor Raghuram Rajan witnessed central bank officials from the department of banking supervision identifying loans of concern, as well as loans that had potential weaknesses.

Bankers said a new round of AQR, if it happens, is unlikely to throw up any surprises. One of the primary reasons, they said, is the absence of myriad restructuring schemes available earlier as part of the post-global financial crisis forbearance.

“It is all system-generated non-performing assets (NPAs) now, and the system is recognizing the defaults. Last time, we had a lot of restructuring schemes available, which corporates used to postpone recognition. Now, there is nothing of that sort,” said Rajkiran Rai G., chief executive, Union Bank of India. Banks have also reported lower-than-expected covid-19 restructuring of loans. Rai said that the bank’s restructuring book for covid-19 stress is 16,725 crore. Of this, 3,272 crore has already been restructured till 31 December.

“We have to wait for the Supreme Court’s final judgement, and even now, we are declaring our pro forma NPAs, and it is very transparent. These doubts are very stretched, and there is no scope for anybody to hide any NPAs now. I do not think it will throw up any surprise,” added Rai.

Others believe that the advent of the Insolvency and Bankruptcy Code (IBC) 2016 has increased credit discipline among borrowers.

“From a cultural angle and that of credit discipline, it has certainly improved a lot over the last few years, and we have to give full credit to IBC for that,” said Sandeep Batra, executive director, ICICI Bank.