Credit risk emanates from a bank's dealings with an individual, corporate, bank, financial institution or a sovereign. The present paper is designed to study the implementation of the Credit Risk Management Framework by Commercial Banks in India. To achieve the above mentioned objective a primary survey was conducted. The results show that the authority for approval of Credit Risk vests with `Board of Directors' in case of 94.4% and 62.5% of the public sector and private sector banks, respectively. This authority in the remaining banks, however, is with the `Credit Policy Committee'. For Credit Risk Management, most of the banks (if not all) are found performing several activities like industry study, periodic credit calls, periodic plant visits, developing MIS, risk scoring and annual review of accounts. However, the banks in India are abstaining from the use of derivatives products as risk hedging tool. The survey has brought out that irrespective of sector and size of bank, Credit Risk Management framework in India is on the right track and it is fully based on the RBI's guidelines issued in this regard.

Credit Risk is intrinsic to banking and it is as old as banking itself. Credit risk is defined as the possibility of losses associated with diminution in the credit quality of borrowers or counterparties. In a bank's portfolio, losses stem from outright default due to inability or unwillingness of a customer or counterparty to meet commitments in relation to lending, trading, settlement and other financial transactions. Alternatively, losses result from reduction in portfolio value arising from actual or perceived deterioration in credit quality. Credit risk emanates from a bank's dealings with an individual, corporate, bank, financial institution or a sovereign.

In recent years, financial sector failures and banking sector weaknesses have induced policy makers to devise prudent risk management mechanism. Against this backdrop, Basel Capital Adequacy norms, originally conceived during 1988, brought about broad agreement among G-10 central banks for applying Common Minimum Capital Standards to their banking industries. Such standards are aimed at putting all banks on an equal footing with respect to capital adequacy so as to promote safety and soundness in banking. Keeping in view the seriousness of credit risk and need to manage the same appropriately, RBI issued guidelines on Credit Risk Management on October 12, 2002. These guidelines focused that the banks should give credit risk prime attention and should put in place a loan policy to be cleared by their boards that covers the methodology for measurement, monitoring and control of credit risk. Basel Committee has proposed Standardized Approaches, Foundation Internal Rating Based Approach and Advanced Internal Rating Based Approach for credit risk capital charge calculations.

Bank Management Journal, Credit Risk Management Framework, Credit Policy Committee, Credit Derivatives in Banking,Indian Corporate Bonds , Logistic and Z-Score Model, Financial performance,CRISIL's models, Credit Risk Policy, Credit Metrics.