CREDIT RISK MANAGEMENT ON FINANCIAL PERFORMANCE OF NEPALESE COMMERCIAL BANKS

Abstract

The goal of the research-based study "Credit Risk Management on Financial Performance of Nepalese Commercial Banks" was to determine the elements that affect profitability and investigate the connection between these elements and the profitability of Nepal's commercial banks. The factors connected to credit risk are the main focus of this study, which also aims to develop relationships between them. This study would help us address issues such as how Nepal's commercial banks' performance is impacted by credit risk management elements. In order to assess the relevant information about credit risk and profitability and identify the research gap in the context of Nepal, a thorough literature study was carried out. Descriptive and causal-comparative research designs were used in the study, while SPSS was used for analysis. Out of the twenty commercial banks, five were chosen as a sample. This study is entirely based on secondary data that these five commercial banks disclose each year. According to the study's findings, there is no multicollinearity among the variables since the capital adequacy ratio, non-performing loan ratio, loan loss provision ratio, loan and advance ratio, bank size, and base rate are all less than 10. ROA has a negative association with CAR, LLPR, LAR, BS, and BR. ROA are positively correlated with the sole non-performing loan. In contrast, LAR, BS, and BR are demonstrating importance in relation to ROA. Similarly, ROE is negatively correlated with all independent parameters, including CAR, LLPR, LAR, BS, and BR. Every other element has a substantial association with ROE, however the LLPR has no meaningful relationship at all. Therefore, creating a suitable environment for credit risk, following a good procedure for giving credit, and keeping up with proper credit administration and management The study's conclusions will serve as a guide and advantage for regulators, agencies, policymakers, and other pertinent stakeholders.