An Empirical Association between the Credit Risk Management and Banks’ Profitability

COMMERCE

In the last several decades, the banking industry has been hit by numerous financial crises. Due to the banking system's financial crisis, which impacted many nations throughout the world, credit risk management has received a lot of traction. Because credit risk dictates a bank's existence, development, and profitability, it must be handled carefully and properly. The goal of this study is to see if there is an empirical link between credit risk management and bank profitability. Return on assets and return on equity are used as dependent factors, whereas credit risk management indicators such as capital adequacy ratio, non-performing assets ratio, and leverage ratio are used as independent variables. The Reserve Bank of India's database and official website were used to gather secondary data. Descriptive statistics, analysis of variance (ANOVA), correlation analysis, and multiple regressions were utilised in the study. It was discovered that bank profitability (ROA & ROE) has a positive and substantial association with CAR, but NPA has a negative and significant link with CAR. On the other side, there is no substantial association between profitability performance (ROA & ROE) and LR. The findings show that non-performing loans, which may expose banks to a lot of volatility, and the global financial crisis have a negative impact on bank profitability.

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