Credit Risk Management Index Score for Indian Banking Sector : An In-Depth Analysis

Over the last decade, the role of credit risk management practices in the overall risk management in the commercial banks was well accepted and banks have established a set of these practices, collectively known as Credit Risk Management (CRM) framework. The present paper evaluates the strength of CRM framework in the Indian banking industry, and makes a quantitative assessment of the overall CRM framework and each of its three major elements, namely, CRM organization, CRM policy and strategy, and CRM operations and systems. The CRM operations and systems are closely studied at transaction and portfolio levels. The paper statistically arrives at two potential areas of improvement that bank management should focus on in the near future, namely, credit risk monitoring at transaction level and credit portfolio risk analysis. The study provides new insights into CRM process and CRM framework in commercial banks