STRATEGIC ANALYSIS OF CREDIT RISK MANAGEMENT WITH RELEVANCE TO CIBIL

Credit risk is a fundamental aspect of banking and entails the possibility of late or nonexistent payments, that negatively influence the cash flow and liquidity position of a bank. The major reason of failure of financial institutions is credit risk management even after various developments in the financial services sector. Regulations that prohibit connected-party lending and substantial exposure to linked parties can reduce credit risk. Both the underlying worth of a financial institution’s capital and the value of the loan portfolio are impacted by asset classification and the subsequent provisioning against potential losses. The customer profile needs to be clear and the risks related to the main banking products need to be recognized and controlled. Liquidity risk management and loan product maturity profiles are closely related. The target of the paper is understanding the strategic credit risk management with the help of credit scoring considering the mechanism of Credit Information Bureau of India (CIBIL). This study will help in understanding the relevance of credit scoring done by CIBIL to measure the credibility position of the borrower. The credit scoring is done by CIBIL that is India’s first CIC(Credit Information Company). Credit scoring is done by CIBIL based on the customer’s past performances related to repayment, duration of loan, owned accounts, new credit and types of credit taken. Based on the scores giving by governing authorities to the borrowers, their credibility can be assessed thus makes easier loan allocation and risk assessment. The study is an exploratory research thus the data is collected from secondary sources which includes publications of Reserve bank of India, Bank’s annual report, risk management association portal. Keywords: CIBIL, Credit Risk Management, Credit Risk, Credit score