Impact of Credit Risk Management on the Financial Performance of Commercial Bank

Abstract

ABSTRACT The completed on title impact of credit risk management in the financial performance of commercial banks. The general objective of study was impact of risk management on profitability of commercial banks with specific objectives of study were to assess the present status of credit and credit risk of Nepalese commercial banks, examine the relationship CAR, NPLR, MQR and CDR with ROA and ROE of Nepalese commercial banks and to analyze impact of CAR, NPLR, MQR and CDR on financial performance (ROA and ROE) of Nepalese commercial banks. Researcher had complete study under the descriptive and causal research design 3 commercial Banks taken as sample out of 20 in Nepal. The quantitative nature of data collected from the published source such as annual report, data from NRB, the collection method of data was non-probability. The data analysis method was descriptive such as means, standard deviation, correlation and regression. The results of the study were Return on assets, capital adequacy ratio, non-performing assets, and credit deposit ration. The correlation of return on with return on equity was insignificant, with capital adequacy ratio was negative low degree, with non-performing assets is negative insignificant, and with credit deposit ratio low degree negative correlation that is and management quality ratio is moderate level negative insignificant. Correlation of return on equity with capital adequacy high correlation significant, with non-performing assets is very high significant, with credit deposit ratio very high negative significant and with management quality ratio is very low. Regression line of CAR, NPL, CDR and MQR on ROA was insignificant. Similarly, regression line CAR, NPL, CDR and MQR on ROE was significant. Keywords: Return on Assets (ROA), Return on Equity (ROE), Capital Adequacy ratio (CAR), Non-performing loan (NPL), Credit Deposit Ratio (CDR) and Management quality ratio (MQR)