Asset Quality Review is the RBI’s inspection of the balance sheet of selected commercial banks to examine the health of the banks.
The RBI makes inspects the balance sheets of every banks as part of its Annual Financial Inspection (AFI) process. But in recent years, the balance sheet conditions of banks become alarming and for that the RBI made inspection of selected banks’ balance sheets in random. The report from such exercises is known as Asset Quality Review.
The RBI made special inspections during 2015 and 2016. RBI has said that it does not intend to make the AQR an annual or a frequent exercise.
The AQR created havoc on banks’ profit & loss accounts as many large lenders slipped into losses in both the said quarters, which resulted in some of them reporting losses for the full financial year.
