‘New AQR won’t throw up surprises’

MUMBAI: 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 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. Others believe that the advent of the 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,” said Sandeep Batra, executive director, ICICI Bank.