IMPACT OF CREDIT RISK MANAGEMENT PRACTICES ON FINANCIAL PERFORMANCE OF COMMERCIAL BANKS
Ami Vaghela ,
Research Scholar,
Dr. Saurabh Kumar Singh
Research Guide
Department of Management, Shri JJT University, Jhunjhunu, Rajasthan, India
Abstract :
This study examines the impact of credit risk management practices on the financial performance of commercial banks. Effective credit risk management is essential for maintaining asset quality, ensuring liquidity, and safeguarding profitability, especially in an increasingly volatile banking environment. The study explores key practices such as credit appraisal procedures, loan monitoring systems, credit risk policies, and provisioning strategies, and evaluates their influence on financial indicators including return on assets (ROA), return on equity (ROE), and non-performing loan (NPL) ratios. Findings from reviewed literature and empirical evidence indicate that strong credit risk management significantly reduces loan default rates and enhances overall financial stability. Banks that adopt rigorous credit assessment, continuous monitoring, and robust risk mitigation frameworks tend to experience improved profitability and reduced exposure to credit losses. The study concludes that effective credit risk management practices are fundamental to sustaining financial performance and recommends that commercial banks continuously strengthen their risk assessment models, invest in staff training, and adhere to regulatory guidelines to enhance stability and long-term growth.
Keywords: Credit Risk Management, Non-Performing Loans, Financial Performance, Commercial Banks, Loan Loss Provision, ROA, ROE
