Shaila Kamath

A comparative study of credit risk management: a case study of canara bank and karnataka bank.

  • Authors Details :  
  • Shaila Kamath,  
  • Dr. Ramesh Pai

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Banks need finance to carry out their day to day activities smoothly. There will be times where the borrowers fail to repay the money leading a risk to the lenders. There are various types of risks faced by the banks such as financial and non-financial risk in the unstable environment. These risks may be a threat for the existence and achievements of banks. A Credit risk is the risk which arises when the borrower fails to make required payments. It is a huge loss to the lender where he loses both the principal and interest which leads to the interruption of the cash flows and increase in collection costs. Banks usually follow a certain framework while lending loans so that they can manage the credit risks. The main purpose of credit risk management is to find out how much credit should be provided to the borrowers and the different ways to collect the amount back. The success of banks depends on the formulation of the policies and procedures of lending the loans and collecting the amount back and avoid Non-Performing Assets (NPA) to the banks. When banks collect their debts systematically and avoid the Non- Performing Assets (NPA), they can survive in the competitive market. The study is focused on the comparison of two banks such as Canara Bank and Karnataka Bank with regard to loans, advances, interest received and expended and the variation in the levels of Non- Performing Assets. Methodology used is the secondary source of data where the balance sheet of the banks and the income and expenditure statement of the banks are being used to explore the credibility and the capacity of the banks in managing the credit risk.

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