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RBI’s asset quality review: Deep surgery starting to show results 

June 9, 2016

Anil Sasi, The Indian Express

The impact of the Reserve Bank of India’s Asset Quality Review, which is at the heart of the “deep surgery” prescribed by the RBI Governor Raghuram Rajan in February as a desperate measure to clean up bank books, could be beginning to show results.

According to RBI deputy governor SS Mundra, even in tier II and tier III towns, promoters have begun to realise the banks are going to come hard after them if they do not observe credit discipline.

For the central bank, the Asset Quality Review exercise at banks — broadly similar to stress tests conducted by the US and European authorities after the global financial crisis — is specifically aimed at tracing the sources of pressure points in the country’s banking sector at an aggregate level.

In the US and European stress tests, the rigour of their respective exercise was markedly different. The American stress tests credibly signaled the health of financial institutions and thereby stemmed the spread of the panic, whereas that in Europe did little to allay market suspicions and fears. Read more

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