CREDIT RISK MANAGEMENT IN COOPERATIVE BANKS IN INDIA

ABSTRACT

Indian economy is growing very fast and that growth can be sustained only when it is strive to encompass participation from all the sections of society. Lack of access to financial services for weaker section of the society will amplify inequality and social instability and this will also lead to decline in Investment which will pose an eventual threat to economic stability and growth. A majority of population in the country are living in rural area. Hence, in an attempt to achieve the financial inclusion of such population, cooperative banks emerged as the best way to reach those sections of society which are excluded from the benefits of financial services at affordable costs. It is therefore felt that cooperative banks can improve credit delivery into far flung rural areas. These are having a long rural experience with good network in rural areas. The various aspects of such inclusion, increasing deregulation, introduction of innovative products, and financial instruments as well as innovation in delivery channels have highlighted the need for Cooperative Banks to be prepared in terms of risk management. Risk is an inherent part in any walk of life in general and in banking business in particular. The effective management of risk is essential for long term success of a banking institution. The credit risk management in cooperative banks may include the use of the credit policy which establishes the authority, rules and framework for the effective operation and administration of the credit portfolio for minimization of the credit risks. The principal concern of the study is to assess what extent banks can manage their credit risks, what tools or techniques they use to manage their credit risk and to what extent their performance can be affected by proper credit risk management policies and strategies.

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