Title:
Credit Risk Management Practices in Commercial Banks: A Comparative Study of Public and Private Sector Banks in India

Authors:
Dr. Suman Kalyan Chaudhury, Dr. Saroj Kumar Dash, Dr. Pradeep Kumar Acharya, India

Abstract:

Credit risk management (CRM) is a critical function of commercial banks because the quality of credit appraisal, approval, monitoring, early-warning mechanisms, recovery, governance, and data capabilities directly influences the management of credit exposures and asset quality. This study comparatively examines credit risk management practices in selected public- and private-sector commercial banks in India using a descriptive and comparative mixed-source approach. Primary evidence was obtained through a structured 20-item questionnaire covering five dimensions of CRM: appraisal and approval, monitoring and early warning, mitigation and recovery, governance and escalation, and data and staff capability. The study also examines five years of publicly reported banking-sector data on gross and net non-performing assets (NPAs), supplemented by Reserve Bank of India publications. The employee-response analysis indicates generally positive perceptions of CRM practices, with internal credit grades informing decisions receiving the highest mean score (3.74), while prompt remedial or recovery action recorded the lowest (3.23). Private-sector respondents reported higher mean scores across all five CRM dimensions; however, bank-level comparisons did not provide convincing evidence of a statistically significant difference in ownership. The secondary data analysis shows a substantial improvement in reported asset quality across both banking groups from 2020–21 to 2024–25. Public-sector gross NPA ratios declined from 9.1% to 2.6%, while private-sector ratios declined from 4.8% to 1.8%, indicating a narrowing of the sectoral gap. The findings highlight the importance of strengthening independent review of credit exceptions, documenting and tracking early-warning cases through to resolution, improving the timeliness of remedial action, and monitoring NPA stocks alongside additions, recoveries, upgrades, and write-offs. The study emphasises that ownership-based differences should not be interpreted as causal without institution-level longitudinal evidence linking CRM practices with subsequent asset-quality outcomes.

DOI: https://doi.org/10.51505/IJEBMR.2026.11106