Management of risk in banking sector in India

Banking institutions are the pillars of a strong and sound economy. However, banks all over the globe are comparably fragile institutions, which are built on customers’ trust, brand reputation and more importantly dangerous leverage. In case of any trouble, banks can collapse and significantly, failure of one bank can trigger crisis in the economy. That is why banks need constant policing by the Central bank so as to assess their risk exposure as well as their financial health Thus, as risk is indispensable for banking business, proper assessment of risk is an integral part of a bank's risk management system. Banks are focusing on the magnitude of their risk exposure and formulating strategies to tackle those effectively. Moreover, the RBI has adopted a series of steps to ensure that individual banks tackle risks effectively by setting up risk management cells and also through internal assessment of their risk exposure. Apart from this, RBI has opted for on-site and off-site surveillance methods for effective risk management in the Indian Banking sector, so that systemic risk and financial turmoil can be averted in the country. Present paper is to make an attempt to identify various types of risks faced by the banking industry and the process and techniques of risk management adopted by the banking sector.