Risk Management in Commercial Banks: A Perspective on Indian and Global Banks

Munish Makkad, Pallab Sikdar
(Birla Institute of Technology (BIT), A-7 Sector-1, Noida–201301, Uttar Pradesh, India)

Abstract: In modern economic environment, Risk has become a part of business existence and each individual business entity, whether offering a product or a service, is subjected to certain risks in accordance with its nature and scale of operations. Commercial Banks, a key component of financial services sector, are no different in this regard. Commercial Banks are majorly used by the market participants towards gathering market knowledge as well as in lieu of their transaction efficiency and funding capacity. In process of the rendering such services commercial banks are exposed to multifaceted risks which are absorbed, transferred or eliminated by the concerned banks based on internal cost considerations. This paper highlights the proactive and superior regulatory sanctions put in place by Reserve Bank of India, India’s central bank, towards ensuring sound and risk free commercial banking operations in the wake of global financial crisis. Credit risk, a major variant of bank’s financial risk has been discussed, along with proposed ways of managing it. In addition, a perspective on global banking developments has been provided.

Key words: risk management; commercial bank; global financial crisis

JEL codes: G2, G20, G21