IMPACT OF CREDIT RISK MANAGEMENT ON FINANCIAL PERFORMANCE OF NEPALESE COMMERCIAL BANKS

Abstract

Credit risk management has become an engaging topic for the financial institutes in Nepal. The turmoil in the financial industry emphasizes the importance of effective risk management procedures. The objective of this research study was to identify the credit risk management indicators and their associations with the financial performance of Nepalese commercial banks. According to the findings, the capital adequacy ratio, non-performing loan ratio, and liquidity ratio all have a detrimental impact on bank performance, according to the findings. On the other hand, LLP did not appear to be a significant factor in determining the bank’s performance. As a result, it is advised that to enhance financial performance and minimize the risk of non-performing loans in the future, banks must watch very carefully the loans’ performance and analyze thoroughly the clients’ credit history and ability to pay back their debts prior to any approval of loan applications.