A STUDY ON CREDIT RISK MANAGEMENT IN EMERGING MARKETS: CHALLENGES AND SOLUTIONS -ULTRATECH CEMENT

Abstract

Credit risk management is a crucial aspect of financial and banking operations that involves identifying, assessing, and mitigating the risk of loss arising from a borrower’s failure to repay loans or meet contractual obligations. This study examines the strategies, tools, and frameworks adopted by financial institutions to manage credit risk effectively while maintaining profitability and regulatory compliance. It focuses on the entire credit lifecycle, including credit appraisal, rating systems, loan sanctioning, monitoring, and recovery processes. The research highlights the importance of internal credit rating models, risk-based pricing, portfolio diversification, and adherence to regulatory guidelines such as those prescribed by the Basel Accords and the Reserve Bank of India (RBI). It also explores the role of technology and data analytics in improving risk prediction and early warning systems. The findings reveal that a sound credit risk management system not only reduces the incidence of non-performing assets (NPAs) but also strengthens the overall creditworthiness and sustainability of financial institutions. The study concludes that credit risk management is essential for ensuring financial stability, investor confidence, and long-term growth in the banking and lending sectors.