Question

For cleaning up the balance sheets of banks, RBI conducted Asset Quality Review (AQR) of banks. What is not correct about AQR?

A This is different from Annual Financial Inspection (AFI) of banks. Correct Answer Incorrect Answer
B AQR resulted in higher provisioning requirement for most of the banks and therefore they reported lower profits. Correct Answer Incorrect Answer
C Reported Non-Performing Assets (NPAs) of banks increased after the AQR Correct Answer Incorrect Answer
D AQR was initiated during the tenure of Governor Raghuram Rajan Correct Answer Incorrect Answer
E AQR was conducted to increases the capital base of banks Correct Answer Incorrect Answer

Solution

Typically, Reserve Bank of India (RBI) inspectors check bank books every year as part of its annual financial inspection (AFI) process. However, a special inspection was conducted in 2015-16 in the August-November period. This was named as Asset Quality Review (AQR). This is at the heart of the “deep surgery” prescribed by the RBI Governor Raghuram Rajan as a desperate measure to clean up bank books.

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