CREDIT RISK MANAGEMENT OF DEVELOPMENT BANKS IN NEPAL

Abstract

The foundation of a financial institution's credit risk management (CRM) program is the development of reliable lending guidelines and an effective framework for risk management. The risk management committee is in charge of designing policies, industry- specific standards and guidelines, as well as restrictions on risk concentration. The study analyze the financial indicators of credit risk management and their relationship. The main objectives of the study is to assess the impact of CD ratio, interest income ratio and non- performing loan ratio on profitability of development banks in Nepal. The study has adopted the analytical and descriptive research design. All the Development banks operating in Nepal are considered as the population. Thus, here five development banks in Nepal are taken as sample with the time frame of 10 years panel data. Basically purposive sampling will be used in this study. The study found that the IITLA and IETTD has the significant impact on profitability of the development banks in Nepal. Total loan and advance, loan and advance to total deposit ratio, interest income ratio, interest expenses ratio, non-performing loan ratio and loan loss provision are the major determined factors that always drives the profit of the financial institution i.e. banks in this study