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

The study aims to investigate the effect of credit risk management on the financial performance of Nepalese commercial banks. For this study, secondary data and descriptive and causal-comparative research methodologies were employed. The E-view-12 student version was used to evaluate the 210 observations of balanced panel data from 15 commercial banks from FY 2010–11 to FY 2022–23. The capital adequacy ratio and credit-to-deposit ratio were shown to have statistically significant and positive coefficients. Both the capital adequacy ratio and the credit-to-deposit ratio have a substantially beneficial effect on the profitability of Nepal's commercial banks, according to the considerable positive coefficients. Therefore, banks should maintain an appropriate capital reserve to absorb a reasonable amount of losses and prioritize improvements in efficiency for expanding their lending and investment activities to enhance the bank’s financial stability and performance. KEYWORDS: Credit to Deposit ratio, Capital Adequacy Ratio, Non-performing Loan Ratio, Bank Size, Return on Assets.