An Empirical Study on Credit Risk Management Practices of Commercial Banks in India

Abstract

Credit risk is the risk of default on a debt when a borrower failing to make required payment. In the credit risk the lender bear the principal and interest amount. This loss may be complete or partial. Credit risk is the risk of default on a debt when a borrower failing to make required payment. In the credit risk the lender bear the principal and interest amount. This loss may be complete or partial. There are number of causes for the credit risk like customer may fail to make a payment and government grants bankruptcy protection to an insolvent business. The relationship between credit risk and other risks should also be considered by banks. The effective management of credit risk is a critical component of a comprehensive approach to risk management and important to the long-term success of any banking organization. Effective credit risk management process is a way to manage portfolio of credit facilities. Credit risk management encompasses identification, measurement, monitoring and control of the credit risk exposures. The effective management of credit risk is a critical component of comprehensive risk management and essential for the long term success of a banking organization. This study is divided into two parts (1) To analyze and compare the financial performance of selected Private and Public sector Banks and (2) To identifying the factors contributing to Credit Risk Management and its impact on performance of selected Public and Private Sector Banks in India. Through the analysis society can know about which banking sector performs better and which banking sector have more profitable to investing activities. newlineChapter one provides the background for a comprehensive understanding about the concept of banking in India. This chapter sets the tone for the research. It explains the Credit Risk Management. This chapter also explains the RBI Guidelines for Credit Risk Management and NPA. The Impact of NPAs on the performance and profitability of banks. newline