CREDIT RISK MANAGEMENT IN COMMERCIAL BANKS

The banking sector plays a vital role in the stability and growth of the economy by providing a secure environment for investors and customers, this security could be ensured by using one of the tools – CAMEL approach (this approach is well documented in various financial literature, regulatory guideline and academic paper), a robust frame work used by regulatory authorities to assess the performance and the stability of the institutions. By vigorously evaluating these CAMEL approach helps banks maintain sound practices, mitigate risk and foster trust among the stakeholders. This mainly focuses on five components – (1) Capital adequacy (2) Asset quality (3) management quality (4) earnings and (5) Liquidity. Provides a comprehensive and effective framework to ensure sound credit risk management. Implementing these insights can help commercial banks to achieve better financial health and resilience against economic shocks. KEYWORDS – Risk management, Financial health, Earnings and liquidity, Capital, CAMEL approach, Assets.