Published Online:July 2026
Product Name:The IUP Journal of Applied Finance
Product Type:Article
Product Code:IJAF010726
DOI:10.71329/IUPJAF/2026.32.3.5-20
Author Name:Ajit Dayanandan, Rachappa Shette, Sudershan Kuntluru and Soumik Bhusan
Availability:YES
Subject/Domain:Finance
Download Format:PDF
Pages:5-20
The study examines whether the earnings quality of Indian banks improved following the RBI’s regulatory intervention of mandating asset quality review (AQR) among banks in India during the period 2011-2023, i.e., pre-AQR (2011- 15) and post-AQR (2016-2023). The study examines financial rounding among Indian banks during 2011-2023 by applying Benford’s law. It also examines whether earnings quality improved after the regulatory intervention among all scheduled commercial banks in India. Analyzing the financial indicators of 552 bank years for the period 2011 to 2023, the study found the existence of rounding practice in banking companies in the pre-AQR period, especially for public sector banks, while it was absent in the private sector banks. However, such rounding was absent after the issue of AQR by the RBI. Through AQR, RBI is successful in reducing the rounding practice in public sector banks and improving their earnings quality.
In the context of capital market efficiency, a significant body of research explores the effects of transparency through disclosures made by banks and other corporations. Drawing on scholarly work (e.g., Bertomeu & Chaynel, 2016; Verrecchia, 1983), it is evident that managers are selective in what they disclose, often publicizing information that inflates stock prices while suppressing unfavorable news.