Credit Risk Management and Performance of Commercial Banks

Abstract

This study examines the credit risk management and bank performance of commercial banks. The study based on secondary data of four commercial banks with 40 observations for the periods 2010/11 to 2019/20. The return on assets and return on equity were selected as dependent variables while capital adequacy ratio, nonperforming loan

ratio, cost per loan assets, cash reserve ratio and bank size are the independent variables. The data were collected from annual reports of concern sample bank. The Pearson's correlation coefficients and regression models, variance inflation factors (multicollinearity in regression model results) are too estimated to test significant impact of bank specific factors on the credit risk management and bank performance of commercial banks. Calculated data has been tabulated and analyzed by using MS-Excel and SPSS. The result shows that capital adequacy ratio, non- performing loan, cash reserve ratio and bank size are positively significant with return on assets whereas cost per loan assets has insignificant with return on assets. The study concludes capital adequacy ratio and cash reserve ratio are significant with return on equity and non-performing loan ratio, cost per loan assets and bank sizes are insignificant with return on equity of Nepalese commercial banks.