Credit risk management in banks: An approach to Indian banking industry

Risk is an inherent part of a Bank's business. The effective management of credit risk is a critical component of comprehensive risk management and essential for long-term success of a banking institution. In view of this, aligning credit risk management to bank's organizational structure and business strategy has become integral in banking business. This research will focus on different aspects of the banking industry with primary focus being on credit risk management with a two-fold approach i.e. firstly focusing on the theoretical aspects of risk management approach and analyzing the overall implementation of this approach in Indian banking sector. Foremost amongst them is the wind of economic liberalization that is blowing across the globe. India is no exception to this swing towards market-driven economy. Globalization and significant competition between foreign and domestic banks, survival and optimizing returns are very crucial for banks and financial institutions. However, selecting the efficient customer and providing innovative and value added financial products and services are another paramount factors. In order to ensure transparency of risks taken, it is the responsibility of banks to accurately, completely and in a timely fashion, report the comprehensive set of credit risk data into the independent risk system.

"Banks are in the business of managing risk, not avoiding it ….…….."