AN INTERNSHIP REPORT ON CREDIT RISK MANAGEMENT: A CASE STUDY ON RUPALI BANK LIMITED, CHEHELGAZI BRANCH, DINAJPUR

Abstract

Credit risk management has become an important topic for financial institutes, especially since the business sector of financial services is related to conditions of uncertainty. The goal of credit risk management is to maximize a bank’s risk-adjusted rate of return by maintaining credit risk exposure within acceptable parameters. This report objective was formulated in order to gain a better understanding of credit risk management and to get knowledge about the effectiveness of loan and sanction procedure that is conducted on the evaluation of credit risk. Credit risk has always been a vicinity of concern not only to bankers but to all in the business world because the risks of a trading partner not fulfilling his obligations in full on due date can seriously jeopardize the affairs of the other partner. The axle of this study is to have a clearer picture of how banks manage their credit risk. This study showed that banks credit risk assessment process for loans provides the bank with the necessary tools, procedures and observable data to use for assessing credit risk, accounting for impairment of loans and for determining regulatory capital requirements. The study finds, credit risk is mitigated by appropriate credit appraisal systems before lending and proper collateral or guarantees are taken to hedge the risk. This leads the researcher to conclude that banks with good credit risk management policies have a lower loan default rate and relatively higher return on asset.