IMPACT OF CREDIT RISK ON BANKS’ PROFITABILITY: A CASE STUDY ON IDBI BANK

Abstract

Banking system is building block of Indian economy contributing nearly 7.70% of national GDP and providing employment to around 1.50 million. Past poor credit risk management by PSU as well private Banks has shaken the Indian economy by eroding their profit, a major problem which is studied in the context of IDBI Bank. The primary goal of the study is to examine how solid credit risk management affects the banks' enhanced proficiency metric. The research questions are to find out the relationship between “Credit risk management” indicators like “GNPLR (Gross nonperforming loan ratio)”, “CRWA (Credit risk weighted asset)” with the “ROE (return on equity)” of banks. The scope of the study is limited to IDBI Bank. Quantitative research method will be used for the study by collecting secondary data from the past 17 years financial of the IDBI Bank from its website. Co-relation and Linear multiple regression statistical methods is used by using SPSS software. The research findings indicate that, there is inverse relationship between the credit risk management and profitability in IDBI Bank. Hence it is suggested that the Banks should adopt suitable credit risk management tools to enhance their profitability to remain resilient and competitive in the market.