Risk management and Indian Banking: Opportunities and Challenges

Abstract

This paper aims to address the growing need for new standards in the management of two major risks financial entities face - credit risk and liquidity risk, in the context of this phenomenon extremely large and complex, by identifying risks, analyzing them and presenting their management techniques.

Taking into account the fact that the banking system plays a crucial role in any national economy as a central pillar in its functions: lending the real economy and acting as a payment system-base regulation and prudential supervision of the banking system is the main component and also a prerequisite for ensuring and maintaining the financial and economic health of a country. Regardless of the approach, credit risk is the main cause of bank failures and from here the need for the imposition of minimum requirements in managing credit risk and also liquidity risk is seen as the risk of disruptions in providing liquid funds of the bank.

The ultimate goal of this paper is to minimize the consequences arising from the banks activity or at least allow it to absorb only the optimal amount of this type of risk.